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Long-term buying in China Mobile

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Long-term trades are looking for China Mobile to rally in the next 14 months.

More than 2,700 January 2015 60 calls were purchased for $1.20 and $1.25 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest, indicating that these are new positions.

These long calls lock in the price where traders can buy the stock no matter how far it might climb. They could be sold earlier if premiums rise with any rallies before then, but the contracts will expire worthless if shares remain below $60 through mid-January 2015. (See our Education section)

CHL fell 0.75 percent yesterday to close at $51.93, continuing to trade well below its September highs above $57. The Hong Kong-based wireless carrier gapped down from the $55 level on Oct. 21 after missing quarterly estimates, and shares have been trapped in a tight range since. There has been speculation that China Mobile will finally reach a widely anticipated deal to carry Apple's iPhones sometime in 2014, which might factor into yesterday's long-dated call buying.

Total option volume in the name yesterday was triple its daily average for the last month. Overall calls outnumbered puts by a bullish 28-to-1 ratio.

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