Unusually Large Nio Option Traders Bet Big On More Upside

Wayne Duggan
·3 min read

Nio Inc - ADR (NYSE: NIO) shares are up 2,610% over the last year, and some large option traders are betting the Nio rally still has legs.

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

  • At 10:49 a.m., a trader bought 205 Nio call options with a $20 strike price expiring on Feb. 10 near the ask price at $34.83. The trade represented a $714,015 bullish bet.

  • At 10:55 a.m., a trader sold 306 Nio put options with a $75 strike price expiring on Dec. 18 near the bid price at $22.25. The trade represented a $680,941 bullish bet.

  • At 11:01 a.m., a trader bought 300 Nio call options with a $40 strike price expiring on Feb. 19 at the ask price of $19.50. The trade represented a $585,000 bullish bet.

  • At 11:21 a.m., a trader sold 481 Nio put options with a $55 strike price expiring on Apr. 16 near the bid price at $55. The trade represented a $726,358 bullish bet.

Related Link: Citron Says It's 'Insulting' To Call Blink Charging An EV Stock

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 Tuesday, they could certainly be institutional hedges.

Nio’s Big Move: Nio shares are up 14% in the last week as buying enthusiasm for EV stocks continues to drive share prices higher. The bullish trading action comes despite warnings from former Nio bull and Citron Research editor Andrew Left earlier this month.

Left compared Nio to Tesla Inc (NASDAQ: TSLA) back in November 2018 when Nio was trading at just $7 per share. However, on Nov. 13, Left said Nio investors need to be cashing out after the stock’s historic run.

“After a rocky road of trading, NIO has found itself in unchartered territory that can never be justified by its current standing in the China EV market or its near-term prospects,” Left wrote.

Nio reported 5,055 vehicle deliveries in October, up 100.1% compared to a year ago. Nio reported a $1.1-billion net income loss in the third quarter earlier this month. Nio’s revenue was up 146% in the quarter to $4.53 billion, and the stock’s market cap now stands at $72.5 billion.

NIO Chart by TradingView new TradingView.widget( { "width": 680, "height": 423, "symbol": "NYSE:NIO", "interval": "D", "timezone": "Etc/UTC", "theme": "light", "style": "1", "locale": "en", "toolbar_bg": "#f1f3f6", "enable_publishing": false, "allow_symbol_change": true, "container_id": "tradingview_5bd9a" } );

Benzinga’s Take: When a stock like Nio gets caught in a wave of “irrational exuberance,” arguments about valuation and fundamentals like the ones Left made are totally irrelevant in the near-term.

Nio’s largest option traders on Tuesday appear to be betting that the stock’s bullish momentum will continue in coming months, while longer-term investors are likely looking to avoid the potential downside once the stock finally runs out of gas.

Photo courtesy of Nio. 

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