Bulls Dial for Rally in China Mobile

Oct. 5.10 | About: China Mobile (CHL)

By David Russell

The bulls are returning to China after a three-year retreat, and one investor is targeting the country's largest telecom.
CHL vs. FXI

optionMONSTER's Heat Seeker tracking system detected a leveraged option strategy on China Mobile (NYSE:CHL), which has yet to recover from the country's 2007-2008 market sell-off. The trader purchased 4,900 January 57.50 calls for $0.90 and sold 4,900 January 47.50 puts for $0.90.

The trade cost nothing to implement and will make unlimited profits if CHL is above $57.50 on expiration. It will lose money if the shares fall below $47.50 and will expire worthless between those two levels.

The stock rose 1.47 percent to $52.51 in morning trading and is up about 5 percent in the last month. That lags the 13 percent gains for the iShares FTSE/Xinhua China 25 Index exchange-traded fund (NYSEARCA:FXI) over the same period (purple line on chart).

Despite the relative weakness, CHL has been making incrementally higher lows since November 2008 and holding support at its 200-day moving average. Some chart watchers may consider that evidence a bullish trend is taking shape.

The trade pushed total options volume in the company to triple the daily average.

Disclosure: No position