Schaeffer's Trading Floor Blog

Stocks to Watch Thursday: Herbalife Ltd., Zulily Inc, and GNC Holdings Inc

Analyzing HLF, ZU, and GNC ahead of tomorrow's trading

by 5/7/2014 4:53 PM
Stocks quoted in this article:

Momentum names that made notable moves on Wednesday and could continue to do so into Thursday's session include health and wellness concerns Herbalife Ltd. (NYSE:HLF) and GNC Holdings Inc (NYSE:GNC), plus e-commerce expert Zulily Inc (NASDAQ:ZU). Here is a quick look at these stocks ahead of tomorrow's opening bell.

Herbalife Ltd. (NYSE:HLF)

Herbalife -- which has fared quite poorly year-to-date, shedding more than 21% of its value -- enjoyed a nice run up the charts today. To be specific, the shares tacked on 3.9% to close at $61.88, after the company agreed to buy back $266 million of its stock from Bank of America Corp (NYSE:BAC). Nevertheless, it appears a number of option traders bought to open puts at the equity's June 60 strike, expecting HLF to backpedal below the $60 level by back-month options expiration at the close on Friday, June 20. Today's bearish activity only highlights a longer-term options trend on Herbalife, per the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.12, which ranks in the 98th percentile of its 12-month range. In other words, speculators have bought to open HLF puts over calls at a near-annual-high pace during the past two weeks. Meanwhile, the stock has racked up a significant amount of short interest. Currently, 34.1% of HLF's available float is sold short, which would take more than eight sessions to cover, at the shares' average pace of trading.

Zulily Inc (NASDAQ:ZU)

Zulily bottomed at a record low of $30.56 today, after last night posting an unexpected first-quarter loss. At the end of the session, the stock was off 29.7% to trade at $32.28. Meanwhile -- after being placed on the short-sale restricted (SSR) list right out of today's gate -- ZU saw an influx of options activity on both sides of the aisle. Call volume jumped to seven times the expected daily amount, while puts traded at a rate that exceeded the norm by 12 times. The lion's share of activity took place at May- and June-dated strikes, with the May 30 put taking center stage. Here, it seems speculators were buying to open contracts, betting on ZU to break below $30 by front-month options expiration in seven days.

GNC Holdings Inc (NYSE:GNC)

GNC's mixed first-quarter earnings results and gloomy full-year outlook sent the shares to their lowest level in over a year, at $35.26. Furthermore, at the closing bell, the stock notched a 13.5% daily loss at $37.75. Like ZU, GNC found itself on the SSR list bright and early this morning, leading droves of speculators to its options pits. Activity skyrocketed on both sides of the fence, with overall volume soaring to eight times what is typically seen on a daily basis. Stepping back, speculators may have expected a dismal earnings outcome from ZU all along. The equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.55 ranks just 1 percentage point from a 12-month peak, as bearish bets have been placed over bullish at a near-annual-high rate during the past 10 weeks.

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