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This afternoon, Herbalife Ltd. (NYSE:HLF) calls and puts are being exchanged at an above-average intraday pace. By the numbers, roughly 3,800 calls have traded, compared to about 9,700 puts. Nevertheless, the stock's 30-day at-the-money implied volatility hit a 12-month low earlier, and was last seen 2.4% lower at 37.7%, implying weakening demand for short-term HLF options.
In the spotlight today is the June 52.50 put, which is the session's most active HLF option. Nearly 3,100 contracts, including several mid-sized blocks, have crossed the tape here. Eighty-five percent of the activity has transpired at the bid price, and there are just 289 contracts in open interest at the strike, collectively suggesting the puts were sold to open.
Today's HLF put writers are banking on the shares maintaining their perch atop $52.50 through the closing bell on Friday, June 20, when front-month options expire. If this happens, the contracts will be rendered worthless, and the traders can pocket the entirety of the initial premium collected as their maximum reward. However, if the stock plummets below the strike between now and then, the sellers could be assigned.
HLF put writing has been a popular strategy of late on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past two weeks, more than 33,000 puts were sold to open -- easily outstripping the roughly 19,000 puts bought to open.
On the charts, Herbalife Ltd. (NYSE:HLF) has tacked on 2.3% this afternoon to wink at $63.66. While the shares pulled back sharply in mid-March on news of a Federal Trade Commission probe, the $52-to-$54 area contained the pullback, and has since helped the stock to recover a healthy portion of its losses.