China Life Insurance attracts buyers


Traders are looking for more gains in China Life Insurance, which is already up nearly 20 percent in the last week.

More than 1,400 January 55 calls were purchased yesterday, almost all of them for $0.25, according to optionMONSTER's Heat Seeker tracking system. This is clearly fresh buying, as the volume was well above the strike's open interest of just 102 contracts before the session began.

These long calls lock in the price where traders can buy the stock for the next eight weeks no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $55. (See our Education section)

LFC, which was trading below $40 only six sessions ago, rose another 1.8 percent yesterday to close at $47.49. The insurance company gapped higher along with other large Chinese names last Friday on reforms announced by the Bejing government, and shares continued to climb this week.

Total option volume in LFC yesterday was 5 times its daily average for the last month. Overall calls outpaced puts by nearly 3 to 1.

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