China Netcom Group (CN) PriceWatch Alert Up To 36.01% Return

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

China Netcom Group (NYSE: CN) closed yesterday at $61.50. So far the stock has hit a 52-week low of $42.33 and 52-week high of $68.97. China Netcom Group stock has been showing support around 59.55 and resistance in the 62.77 range. Technical indicators for the stock are Bullish and S&P gives CN a neutral 3 STAR (out of 5) hold rating. CN appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Sep '08 60 covered call (CN IL) for a net debit in the $56.70 area. That is also the break even stock price for this trade. This covered call has a 59 day duration, provides 7.80% downside protection and a 5.82% assigned return rate for a 36.01% 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 CN Jan '09 40 Call (CN AH) and selling the Sep '08 60 call (CN IL) for a $17.70 debit. The trade has a 59 day life and would provide 6.18% downside protection and a 12.99% assigned return rate for an 80.00% annualized return rate (for comparison purposes only). China Netcom Group 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]