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Emerging Markets, Infrastructure Demand Signal More Growth for Ericsson


Yesterday, the company announced a 5-year contract with Atlantique Telecom. Here's how to play the name on that news.

Shares of Ericsson (NASDAQ:ERIC), the Swedish telecommunications manufacturer, are up 26% on the year and look poised to move higher: 1,000 networks in more than 180 countries use ERIC's equipment, and 40% of the world's mobile traffic passes through its networks.
The company's prospects are bright, considering smartphone production is expected to grow buy 24% to 600 million units in 2013. The emerging markets of China, India, and Brazil will account for much of this growth. The infrastructure upgrades required to accommodate this surge will improve Ericsson's business. Yesterday, the company announced a 5-year contract with Atlantique Telecom to manage the provider's African mobile networks. Today, China Mobile (NYSE:CHL) announced plans to increase capital expenditures to 49% in the world's largest smartphone market. Ericsson currently supplies equipment to the network, and the region accounted for 17% of total sales in 2012.
This morning I saw 2,000 ERIC July 13 Calls trading $.875. This is 3.3 times the usual volume in the options. So, I jumped on board and bought these at $.85.
My Trade: Long the ERIC July 13 Calls for $.85
Risk: $85 per 1 lot
Reward: Unlimited
Breakeven: $13.85
Greeks of this Trade:
Delta: Long
Gamma: Long
Vega: Long
Theta: Short
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