Option Bears Cheer as Ackman Slams Herbalife Ltd. (HLF)

Herbalife Ltd. (HLF) touched a two-year low after being compared to Bernie Madoff

Jan 7, 2015 at 12:10 PM
facebook twitter linkedin


Herbalife Ltd. (NYSE:HLF) is up 2.5% today to trade at $31.17 -- despite earlier reaching a fresh two-year low of $27.60, after long-time critic Bill Ackman weighed in on the nutritional supplements stock. Specifically, the hedge fund manager predicted HLF will miss its current-quarter earnings forecast, and compared the company to scam artist Bernie Madoff. Meanwhile, option bears are hoping the equity will resume its earlier downtrend.

During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HLF has tallied a 10-day put/call volume ratio of 3.22, with long puts more than tripling calls. What's more, this ratio ranks in the 86th annual percentile, suggesting speculators have displayed a healthier-than-usual appetite for bearish bets over bullish of late. Similarly, the security's Schaeffer's put/call open interest ratio (SOIR) of 2.39 is higher than 82% of comparable readings from the last year.

Puts are again popular today, with the contracts crossing the tape at over two times the average intraday rate -- and easily outstripping calls. Some of this activity may spring from the fact that HLF is on the short-sale restricted (SSR) list for the third straight day, as bearish speculators look for alternative ways to place their bets.

By no means is negativity confined to HLF's options pits, as short sellers have zeroed in on the security. A lofty 39.5% of the stock's float is sold short, and would take nearly four weeks to repurchase, at typical daily trading levels. By the numbers, just under 30 million shares are sold short -- higher than all but one reading taken in the last year.

Of course, a hefty portion of those short positions belong to Ackman. Even before today's insult, he repeatedly referred to Herbalife Ltd. (NYSE:HLF) as a "pyramid scheme."

 

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!

Schaeffer's Investment Research Master Portfolio Trial
 


 


 
Special Offers from Schaeffer's Trading Partners