Herbalife Call Options Are Attractive Right Now

Herbalife stock has been rising fast in recent weeks thanks to help from its 50-day moving average

Apr 12, 2017 at 11:07 AM
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Shares of Herbalife Ltd. (NYSE:HLF) have been trending higher in recent weeks, gaining 16% since bottoming near $50 in mid-March, including a 0.6% gain today to trade at $59.03. Guiding the stock higher has been the all-important 50-day moving average, as the shares attempt to fill their post-earnings bear gap from February. What's more, data suggests it could be a good time to buy HLF options. 

hlf stock

Most notably, HLF shares currently boast a Schaeffer's Volatility Index (SVI) of 25%. This reading is only 2 percentage points from a 52-week low, which means near-term options are pricing in unusually low volatility expectations at the moment -- good news for premium buyers. 

Elsewhere, it's also interesting to note that despite Herbalife stock's 22.6% year-to-date lead, short interest is extremely elevated, accounting for almost half of HLF's available float. In fact, going by average daily volumes, it would take HLF short sellers roughly one month to buy back the more than 27 million shares they are in control of. This suggests there's ample sideline cash that could come in and lift the equity higher on the charts. 

Plus, Herbalife Ltd. has been all but ignored by the brokerage community. For instance, only one analyst currently covers HLF stock, and they maintain a tepid "hold" recommendation. If the shares can continue to rise, bullish analyst attention could be yet another catalyst that fuels additional gains. 
 

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