The Bullish Unusual Option Activity for this Chinese EV Maker is Piling up

NIO Inc (NYSE: NIO) is a Chinese company that manufactures electric vehicles that are sold in the People’s Republic of China, Hong Kong, the United States, the United Kingdom and Germany. The company was recently upgraded by Goldman Sachs from neutral to buy and began to really take off after Nikola Corporation (NASDAQ: NKLA) began trading on June 4. The company also announced record deliveries in May on June 4, 2020.

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  • As the positive news piles up, so has the option activity. The call option activity on Tuesday was 1.3 times the average with 45% of the volume getting filled at the ask price. A significant amount of activity was showing up on the 2 JUL 20 $6.50, $7 and $8 strike prices. Yesterday’s activity is on top of significant call buying activity that occurred on June 3 and June 1. That activity was largely for the 19 JUN 20 $6 and $6.50 call strikes.

    The large and increasing speculative interest in the NIO calls places bullish pressure on the share price as the lack of seller’s force option makers to cover their short call position by going long the stock.

    Here are links to our last two unusual option activity reports.

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    Action to Take: NIO is a long opportunity with a $7.50 price target.

    Speculators may want to consider the 19 JUN 20 6/7 long call vertical for around $0.40. the max gain of $60 is established if the price closes above $7 by expiration. Consider closing early for $0.80 or more.