Unusual Options Activity: NIO Limited (NIO)

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  • Chinese electric-vehicle company NIO Limited (NIO) has been a runaway winner and popular stock to trade. One trader sees shares heading even higher before the end of the year.

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  • That’s based on the surge in buying on the December $39 calls. Over 1,580 contracts traded on Friday, a ten-fold rise in volume from the prior open interest of 158. The trade expires in 48 days, and requires a near-30 percent jump in shares from here to move in-the-money.

    The trader paid about $2.00 for the options on average. Shares of NIO are already near an all-time high before pulling back on Friday. A surge to $39 would be a major move beyond the prior high.

    Action to take: Shares are on a strong uptrend, even as U.S. stocks are showing some pre-election jitters right now. That outperformance is likely to continue. Considering the move in shares higher so far this year, it’s feasible to see the $39 calls move in-the-money before expiration.

    If shares continue on their current trend, the option could generate triple-digit returns while offering limited downside relative to shares. Traders may want to join in on this call, or also look at call options in the low $40 range a bit farther out for a trade that isn’t as time-dependent as the December calls.

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