Traders rack up gains in $MELI

Bullish option traders have nearly doubled their money in Mercado Libre.

On June 11, Investitute’s proprietary programs flagged the purchase of 2,500 in-the-money January $250 calls for $70.50 with shares at $298.38. Open interest in the strike was a mere 38 contracts before the activity appeared, showing that this was a new position.

Those calls traded for as much as $135.95 today, almost twice their purchase prices. The stock rose 26.6% in the same time frame, a large move but nowhere near 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.

MELI closed down by 0.2% to $377.44, but the original buyer of these in-the-money calls apparently used today’s pause to roll-up his or her position to the $330 strike, taking most of their profits in the process. Investitute co-founder Jon Najarian cited the unusual activity at the time on CNBC’s “Halftime Report.”