Schaeffer's Trading Floor Blog

Options Check-Up: Herbalife Ltd., General Electric Company, and GameStop Corp.

Analyzing recent option activity for HLF, GE, and GME

by 3/25/2014 5:08 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are nutritional supplements provider Herbalife Ltd. (NYSE:HLF), diversified conglomerate General Electric Company (NYSE:GE), and video game retailer GameStop Corp. (NYSE:GME). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on HLF, GE, and GME.

  • Despite HLF's news-driven bounce of 6.7% yesterday, the stock remains 32% lower on a year-to-date basis to trade at $53.51. As such, option players have bought to open HLF puts over calls at an annual-high pace during the past 10 weeks. This is evidenced by the fact that the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.02 ranks higher than all other comparable readings from the past 12 months. Short-term options on Herbalife Ltd. are attractively priced right now, from a volatility perspective, as the stock's Schaeffer's Volatility Index (SVI) of 58% ranks in the bottom one-third of its annual range.

  • GE -- which is down 8.3% year-to-date to trade at $25.70 -- has seen a change of pace in its options pits of late. Particularly, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio has jumped from 0.15 in mid-February to its current perch of 0.35, which ranks in the 65th annual percentile, demonstrating puts have been bought to open, relative to calls, at a slightly faster-than-usual rate during the past two weeks. Currently, SVI on General Electric Company comes in at 19%, lower than 62% of similar readings taken during the past 12 months. This means the equity's short-term options are less expensive than usual, relatively speaking.

  • Long puts on GME have been flying off the shelves at an annual-high rate, relative to long calls, ahead of the company's fourth-quarter earnings report Thursday morning. In fact, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 3.18 ranks higher than all other comparable readings from the last year. Given that the quarterly event is right around the corner, GameStop Corp.'s SVI of 49% ranks in the 56th percentile of its 12-month range, indicating prices on short-term options are leaning toward the expensive side right now, from a historical standpoint. On the charts, GME shares have fallen nearly 26% over the past three months to trade at $37.79.

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