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Bulls Dial for Gains in China Unicom

By Pete Najarian, co-founder of OptionMonster.

NEW YORK -- China Unicom (CHU)almost never shows up on OptionMonster's screening systems, but Monday the name lit up early with bullish activity.

Traders focused on the October 15 calls, with buyers paying 95 cents and $1. More than 2,100 of those contracts traded against open interest of just 198, indicating that new money was at work in the trade.

Calls lock in the price investors must pay to buy the stock, so they can generate significant leverage if the stock rallies. But if it doesn't, they will be worthless when they expire in mid-October.

The stock popped 3.17% Monday to close at $13.98 after the company announced that it would buy back a 4.56% stake owned by Spanish carrier Telefonica. The company provides GSM and WCDMA cellular services in China. With some 159 million customers as of Dec. 31, it is much smaller than rival China Mobile but still massive.

Total option volume in China Unicom was seven times greater than average. Calls outnumbered puts by more than 500 to 1 in the session.

Najarian has no positions in CHU.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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