$NKLA bulls partner with profits

Nikola (NKLA) powered up for big gains on upside option positions today.

Less than 5 minutes after the opening bell this morning, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,000 Weekly $50 calls, expiring this Friday, for $2.05 to $4.40 with shares at $45.50. This was clearly fresh buying, as open interest in the strike was only 525 contracts before the activity appeared.

Those calls have thus far traded for as much as $7.66 today, about double their average purchase price. The stock rose 18.18% in the same time frame, a large move but nothing like that of its options.

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.

NKLA was last higher on the day by 49.33%, trading at $53.09. The battery-electric and hydrogen fuel-cell electric vehicle maker’s stock has traded sharply higher today after General Motors (GM) announced a partnership agreement.