It took only one day for upside option positions to return big gains in Chinese e-tailer VIPshops.
Just yesterday, Investitute’s tracking systems found that 7,200 July $11.50 calls were purchased for $0.10 to $0.30 with shares at $11.50. These were clearly new positions, as open interest in the strike was only 1,472 contracts before the trades appeared. Investitute co-founder Pete Najarian highlighted the bullish activity on CNBC’s “Halftime Report” a few hours after the call buying occurred.
This morning those calls traded for $0.90, tripling in value less than 24 hours later. The stock was up just 7.3 percent in the same time, illustrating the kind of leverage that can be achieved through options.
Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
VIPS was up 3.83 percent to $11.93 today. The online discount retailer has advanced along with e-commerce names such as Alibaba and JD.com since Beijing’s National Bureau of Statistics released positive data on the industry earlier this week.
VIPshop, which has been the subject of takeover rumors, is scheduled to report earnings on Aug. 14 after the close.