How $VIPS calls soared fivefold

Bullish option traders posted huge gains in Vipshop today.

On Dec. 6, Investitute’s tracking systems detected the purchase of 4,500 February $8 calls for $0.90 to $1 with shares at $8.17. This was clearly a new position, as volume was well above the strike’s open interest of 3,542 contracts.

Those calls sold for $4.40 right after the opening bell this morning, nearly 5 times their original purchase price. The stock rocketed 52.1 percent in the same time frame, a huge move but still far below that of its options on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

VIPS surged 39.22 percent to $11.72 today. The Chinese discount retailer spiked higher on news that it has entered into a partner ship with e-commerce leaders Tencent and J.D.com this morning.