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A Look At Unusually Large Nio Option Trades As Stock Hits All-Time Highs

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A Look At Unusually Large Nio Option Trades As Stock Hits All-Time Highs

Nio Inc - ADR (NYSE: NIO) shares are up 1,720% over the past year, and some large option traders are betting the Nio rally has legs.

The Nio Trades: On Thursday, Benzinga Pro subscribers received several option alerts related to unusually large Nio trades Here are a handful of the largest:

  • At 9:31 a.m., a trader bought 2,001 Nio call options with a $25 strike price expiring on Friday near the ask price at $2.201. The trade represented a $440,421 bullish bet.
  • At 9:43 a.m., a trader sold 2,739 Nio call options with a $23 strike price expiring on Oct. 23 near the bid price at $4.112. The trade represented a more than $1.1-million bearish bet.
  • At 10:02 a.m., a trader bought 984 Nio call options with a $30 strike price expiring on Feb.19 near the ask price at $5.601. The trade represented a $551,538 bullish bet.
  • At 10:11 a.m., a trader sold 560 Nio call options with a $23 strike price expiring on Feb. 19 near the bid price at $9. The trade represented a $504,000 bearish bet.

Related Link: Nikola Lock-Up Expiration Could Be A Ticking Timebomb

Why It’s Important For Nio Investors: Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge.

In this case, given the relatively large size of the largest trades on Thursday, they could certainly be institutional hedges.

Nio’s Big Move: Nio shares are up 34% in the past two days thanks to a big upgrade from JPMorgan. Analyst Nick Lai upgraded Nio from Neutral to Overweight and more than tripled his price target for the stock from $14 to $40.

In the note, Lai said growth of “new energy vehicles” is accelerating in China, and Nio will be a major long-term winner on the high end of the smart electric vehicle market. Lai praised Nio’s impressive product portfolio, its healthy balance sheet and its backing by developmental authorities in the Anhui province of China.

Nio reports 4,708 vehicle deliveries in September, up 133% compared to a year ago. Given the stock’s tremendous performance in the past year, expectations are extremely high heading into the company’s third-quarter earnings report expected out in early November.

 

Benzinga’s Take: Given the combination of the bullishness of JPMorgan and the massive rally in Nio shares in the past year, it’s understandable that large option traders would be taking both sides of the Nio trade at this point. Momentum traders are betting on the bullish trend to continue, while bearish traders are either hedging their bullish bets in the option market or predicting the stock is due for a pullback at some point as traders take profits on their spectacular gains.

 

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