China Telecom (CHA) PriceWatch Alert At $26.78 Break Even

Posted: Tuesday, January 13, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

China Telecom (NYSE: CHA) closed yesterday at $34.58. So far the stock has hit a 52-week low of $25.89 and 52-week high of $87.86. China Telecom stock has been showing support around 33.61 and resistance in the 36.11 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 Volume Leaders list. For a hedged play on this stock, look at a Jun '09 30 covered call (CHA FF) for a net debit in the $26.78 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 22.56% downside protection and a 12.02% assigned return rate for a 27.78% 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 '10 17.50 Call (LNJ AW) and selling the Jun '09 30 call (CHA FF) for a $10.75 debit. The trade has a 158 day life and would provide 18.31% downside protection and a 16.28% assigned return rate for a 38.00% annualized return rate (for comparison purposes only). China Telecom has a current annual dividend yield of 2.90%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]