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Option Clips: Herbalife, Halcon Resources, and National-Oilwell Varco

Reviewing notable options activity on Herbalife Ltd., Halcon Resources Corp, and National-Oilwell Varco, Inc.

by 4/14/2014 12:46 PM
Stocks quoted in this article:

Three equities generating buzz on StockTwits today are nutritional supplements provider Herbalife Ltd. (NYSE:HLF), as well as energy issues Halcon Resources Corp (NYSE:HK) and National-Oilwell Varco, Inc. (NYSE:NOV). Here's a look at how traders have been aligning their speculative bets today.

  • Herbalife Ltd. (NYSE:HLF) is back in the spotlight today, amid unconfirmed reports that the FBI is investigating the firm's business practices. The stock dropped 14% on Friday, but has since bounced back 8% to flirt with $55.61. Nevertheless, HLF remains on the short-sale restricted list, and its 30-day at-the-money implied volatility (IV) has gapped 20.1% lower to 69.1%. Against this backdrop, puts are flying off the shelves at more than twice the average intraday rate, with roughly 17,000 contracts exchanged. For comparison, fewer than 9,000 HLF calls have changed hands thus far. Most active is the April 50 put, where close to 2,500 contracts have traded. However, today's put bias is nothing new for Herbalife, which is slated to report earnings after the close on Monday, April 28. The stock sports a 10-day put/call volume ratio of 1.38 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits just 5 percentage points from a 52-week peak, reflecting a much healthier-than-usual appetite for long puts over calls during the past two weeks.

  • Halcon Resources Corp (NYSE:HK) has shot 10.1% higher to $5.01, following sector peer Goodrich Petroleum Corporation (NYSE:GDP) into the black. HK call volume is running at 17 times the norm this afternoon, with roughly 21,000 contracts exchanged. Meanwhile, just over 1,100 HK puts have crossed the tape. Nine of the 10 most active strikes are calls, with the July 6 call accounting for nearly half of the volume. Almost all of the calls have traded on the ask side, IV has jumped 7.6 percentage points, and volume has surpassed open interest -- all signs of newly bought bullish bets. However, it's worth noting that short interest accounts for 12.5% of the stock's total available float, and would take more than 11 sessions to buy back, at HK's average pace of trading. As such, it's possible that short sellers are buying the out-of-the-money calls to limit losses in the event of a continued rally.

  • Finally, National-Oilwell Varco, Inc. (NYSE:NOV) has edged 1.8% higher to $79.56, bringing it into the black for 2014. Speculators are wagering on more upside for the stock in the short term, with intraday call volume running at double the normal pace. More than 4,100 calls have changed hands, compared to around 2,100 puts. Most popular is the weekly 5/2 80-strike call, where nearly 1,600 contracts have traded, primarily at the ask price. Plus, IV is trending higher and volume exceeds open interest, underscoring our theory of buy-to-open activity. The goal of the call buyers is for NOV to be sitting north of $80 when the options expire at the close on Friday, May 2 -- just five sessions after the company's turn in the earnings confessional.

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