Option Traders Make Big Bets Luckin Coffee Rally Isn't Over

Shares of Luckin Coffee Inc - ADR (NASDAQ: LK) have skyrocketed 134% in the past three months, pushing the stock to above $43. Luckin Coffee shares are now up 153% from its $17 IPO price just last year, but some large option trades believe the stock is brewing

Benzinga · 01/09/2020 18:12

Shares of Luckin Coffee Inc - ADR (NASDAQ: LK) have skyrocketed 134% in the past three months, pushing the stock to above $43.

Luckin Coffee shares are now up 153% from its $17 IPO price just last year, but some large option trades believe the stock is brewing up even more upside ahead.

The Trades

On Thursday, Benzinga Pro subscribers received four option alerts related to unusually large Luckin option trades:

  • At 10:16 a.m. ET, a trader bought 1,100 Luckin call options with a $45 strike price expiring on Jan. 17. The contracts were purchased at the ask price of $1.45 and represented a $159,500 bullish bet.
  • At 10:17 a.m. ET, a trader bought 513 Luckin call options with a $49 strike price expiring on Jan. 24. The contracts were purchased near the ask price at 84.6 cents and represented a $43,339 bullish bet.
  • At 10:28 a.m. ET, a trader bought 647 Luckin call options with a $43 strike price expiring on Friday. The contracts were purchased near the ask price at $1.198 and represented a $77,510 bullish bet.
  • At 10:42 a.m. ET, a trader bought 1,296 Luckin call options with a $48 strike price expiring on Jan. 17. The contracts were purchased near the ask price at $1.351 and represented a $175,098 bullish bet.

Why It's Important

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 modest sizes of Thursday’s trades by institutional standards, it is unlikely they represented institutional hedges.

More All-Time Highs Ahead For Luckin?

Luckin shares surged another 10.3% on Thursday after the company announced the launch of two new products: the Luckin Coffee EXPRESS Smart unmanned coffee machine and the Luckin PopMINI Smart Vending Machine. Luckin’s new vending machines will sell hot and cold beverages and snacks.

Luckin is aggressively expanding its presence in its home country of China, and now has roughly 4,500 locations there compared to about 4,300 Starbucks Corporation (NASDAQ: SBUX) locations in China. In the most recent quarter, Luckin reported 557.6% revenue growth, making the stock an appealing play for emerging market growth investors.

Benzinga’s Take

The third-quarter growth numbers clearly demonstrate the trade war wasn’t holding Luckin’s business back. However, positive trade war developments are generally bullish for the Chinese economy and may also be a driving force behind the stock’s recent rally.

Luckin Coffee's stock traded around $43.68 per share at time of publication.

Do you agree or disagree with these predictions? Email feedback@benzinga.com with your thoughts.

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