Bullish option traders racked up astronomic gains in Vipshop today on strong quarterly results.
On Dec. 6, Investitute’s tracking systems detected the purchase of 4,500 February $8 calls for $0.90 to $1 with shares at $8.17. Volume was well above the strike’s open interest, indicating that this was fresh buying.
Those calls traded up to $9.50 today, more than 10 times their original purchase price. The share price more than doubled in the same time period, but its options far outperformed even that huge move in the stock.
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.
VIPS jumped 6.71% to $17.49 today. The Chinese discount retailer rallied sharply after revenues beat estimates last night.