Market Insights

Nio has been sputtering for years, but some options traders seem to think the Chinese electric-car maker has recharged its batteries.

TradeStation data shows call volume surging in the stock this month. Most of the increase came after the company reported record deliveries last Thursday, September 5.

The unusual activity continued yesterday, especially in short-term contracts expiring this Friday, September 13. Here are some noteworthy points:

• More than 40,000 13-September 5.50 calls traded, with initial blocks fetching $0.03. Premiums leaped as high as $0.26 as the shares moved higher.
• More than 30,000 13-September 6 calls changed hands for $0.01 to $0.07.
• More than 30,000 November 6 calls traded for $0.22 to $0.70.
• Volume exceeded open interest in all three contracts, which suggests new money was put to work.

Calls fix the price where a security can be purchased. They can appreciate rapidly in value when shares rise, as happened on Monday. However they can also lose all their value if the stock is below the strike price on the expiration date.

NIO surged 11 percent to $5.56 and is up 38 percent this month. The Shanghai-based company delivered more than 57,000 vehicles in the second quarter. That was 90 percent more than the previous quarter and 136 percent more than a year prior. Management also forecast higher-than-expected revenue as margins improved.

J.P. Morgan upgraded the stock in response, seeing better fundamentals and sentiment potentially lifting prices into 2025.

Some traders may remember NIO’s sharp rally during the pandemic, when it climbed from under $3 to over $65. The stock has steadily trended lower since, bottoming at $3.61 in April.

Its overall option volume on Monday was more than triple the average over the last month. Calls accounted for a bullish 77 percent of the total.

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