Alibaba continues to pay exponential gains on upside option positions.
On April 24, Investitute’s proprietary programs detected the purchase of 7,500 July $130 calls for $0.91 as part of a bullish vertical spread with shares at $114.74. Open interest in the strike was only 1,743 contracts before the trade occurred, showing that it was a new position.
Those calls traded for $14.35 just before the closing bell today, a gain just shy of 1,500 percent. The stock has gained 25 percent in the same period, an impressive move but one that is dwarfed by that of the options. It was the second winning trade in BABA posted in the last two weeks.
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.
BABA rose 3.69 percent to $143.29 today. The Chinese e-commerce giant spiked higher on June 8 after projecting sales growth of up to 49 percent this year.