Bulls look to ring up China Mobile gains
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 December 57.50 calls for $0.65 and the sale of an equal number of December 50 puts for $0.40. Volume surpassed open interest at both strikes, indicating that new positions were initiated.
The trade cost $0.25 and is similar to owning shares in the Chinese telecom giant. It will make money to the upside because the calls will appreciate while the puts will lose value, and the opposite will happen if CHL declines. Unlike owning equity, however, it will track movements in the underlying less closely as time passes and expire worthless if the stock remains between the two strike prices.
CHL is up 0.26 percent to $54.42 in afternoon trading. It's up 12 percent since the start of 2012 and has been steadily following its 200-day moving average higher. Nonetheless, the shares are still within the same trading range that's held them in check since the Chinese bubble imploded four years ago.
Today's strategy positions the investor for a sharp move in the next two months for minimal cost. He or she apparently wants exposure in the event of a big move, but isn't willing to spend lots of money getting long. (See our Education section for more on how calls and puts can be used to generate leverage.)
Overall option volume is 5 times greater than average so far in the session.