Put Options on CHL on 6/12/2013

China Mobile Limited (CHL) provides mobile telecommunications and related services primarily in Mainland China and Hong Kong. It offers voice services comprising local calls, domestic long distance calls, international long distance calls, intra-provincial roaming, inter-provincial roaming, and international roaming.

Shares are heading lower as company's margins decline. Shares are now setting a new 52-week low.  China Mobile controls almost two-thirds of the Chinese wireless market, but has only 41% of 3G subscribers, as its proprietary 3G network requires an upgrade. This has been a major bottleneck for China Mobile to increase its 3G penetration. Currently, China Mobile is the only player in China which doesn't have a contract with Apple to sell iPhones. Even after adding 26 million 3G subscribers in the first quarter, compared to 8 million year-over-year, China Mobile's average revenue per user declined from $11.57 to $9.78. This suggests that China Mobile is not able to add quality subscribers in the absence of iPhone.

52-Week Trading Range: $50.23 - $59.73

Last Trade: $50.24

Here is the trade:

Buy One CHL July $50 Put for less than $0.95

Lose $0.95 if stock closes above $50 by July expiration

Make $5 if stock closes at $45 by July expiration

Trade Buy 1 July $50.00 Put at $0.90 For a net debit of $0.90 Profit/Loss Analysis Breakeven at $49.10 Maximum profit is unbounded Maximum loss is ($90.00) at strike of $50.00 Closing Summary Sold 1 July $50.00 Put at $2.10

Position closed on 6/20/2013 at price of $2.10 with a 133.33% gain in 7 days.

Updates

6/20/2013 10:14:03 AM

We are closing CHL and locking in profits.

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