By David Russell
The bulls are returning to China after a three-year retreat, and one investor is targeting the country's largest telecom.
optionMONSTER's Heat Seeker tracking system detected a leveraged option strategy on China Mobile (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 (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