China Telecom (CHA) PriceWatch Alert With Support Around $54.60

Posted on Wednesday, July 23, 2008 8:07 AM

China Telecom (NYSE: CHA) closed yesterday at $57.00. So far the stock has hit a 52-week low of $45.31 and 52-week high of $98.66. China Telecom stock has been showing support around 54.60 and resistance in the 58.50 range. Technical indicators for the stock are Bearish and S&P gives CHA a neutral 3 STAR (out of 5) hold rating. CHA appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Sep '08 55 covered call (CHA IK) for a net debit in the $51.60 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 9.47% downside protection and a 6.59% assigned return rate for a 40.76% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the CHA Jan '09 45 Call (CHA AI) and selling the Sep '08 55 call (CHA IK) for a $9.40 debit. The trade has a 59 day life and would provide 4.56% downside protection and a 6.38% assigned return rate for a 39.00% annualized return rate (for comparison purposes only). China Telecom does not pay dividends at this time. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]