Traders win both ways in $NIO

Nimble option traders posted large gains on bullish positions in NIO at the end of last month, and today they also profited as shares of the Chinese electric-car maker pulled back.

On Feb. 27, Investitute’s proprietary programs cited the purchase of 7,000 March $11 puts for $2.08 to $2.35 with shares at $9.90. This was clearly fresh buying, as volume was far above the strike’s previous open interest of 1,104 contracts.

Those puts traded for as much as $4.63 this afternoon, more than twice their average purchase price. The stock plunged 35.15% in the same time frame, showing how quickly options can far outperform moves in their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

NIO was down 3.03% to $6.39 today. The Shanghai-based auto manufacturer missed earnings expectations on March 5, saying deliveries had slowed more than expected.