China Mobile (CHL) 11/3/09 PriceWatch Alert Up To 8.25% Downside Protection

Posted: Tuesday, November 03, 2009 8:37 AM EDT
By: Market Intelligence Center Staff

China Mobile (NYSE: CHL) closed yesterday at $47.29. So far the stock has hit a 52-week low of $38.51 and 52-week high of $59.22. China Mobile stock has been showing support around 46.20 and resistance in the 48.34 range. Technical indicators for the stock are Bearish and S&P gives CHL a neutral 3 STAR (out of 5) hold rating. CHL appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at a Jan '10 45 covered call (CJX AI) for a net debit in the $43.39 area. That is also the break even stock price for this trade. This covered call has a 74 day duration, provides 8.25% downside protection and a 3.71% assigned return rate for an 18.30% 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 CHL Jan '11 20 Call (ZJZ AD) and selling the Jan '10 45 call (CJX AI) for a $23.55 debit. The trade has a 74 day life and would provide 7.91% downside protection and a 6.16% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). China Mobile has a current annual dividend yield of 3.31%. [ATU-Seven Summits Research]