Herbalife Ltd. (HLF) Put Buying Nears Fever Pitch

Herbalife Ltd. option traders are buying short-term bearish bets

Dec 22, 2014 at 10:54 AM
facebook twitter linkedin


Herbalife Ltd. (NYSE:HLF) is sitting out the early broad-market rally, down 1.2% at $37.50. What's more, options traders are betting on more downside for the shares, with HLF puts trading at a 31% mark-up to the norm.

Roughly 4,400 HLF puts have changed hands so far today, compared to fewer than 700 calls. The equity's 30-day at-the-money implied volatility (IV) has popped 5% to 77.5%, underscoring a growing demand for near-term contracts.

Garnering notable attention is the weekly 12/26 35.50-strike put, where IV has surged 13.2 percentage points. Plus, the International Securities Exchange (ISE) confirms at least some buy-to-open activity, suggesting speculators expect HLF to breach $35.50 -- and possibly hit new annual lows -- by Friday's close, when the options expire. Meanwhile, longer-term bears are apparently buying to open the June 27.50 put, amid expectations for HLF to sink to two-year lows in the next six months.

Today's appetite for bearish bets merely echoes the growing trend, as the stock's 10-day put/call volume ratio on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 5.37 -- just 4 percentage points from an annual pessimistic peak. In the same vein, short interest accounts for 38.2% of HLF's total available float, representing more than 12 sessions' worth of pent-up buying demand, at the security's average pace of trading.

On the charts, HLF has shed more than 52% of its value in 2014, with rebound attempts halted by its 10-month moving average. Off the charts, Herbalife Ltd. (NYSE:HLF) remains a favorite target for activist investor Bill Ackman, and last week was asked by the Food and Drug Administration to stop airing a video that implies regulatory approval of its weight-loss products.

Monthly Chart of HLF since December 2012 with 10-Month Moving Average
 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 


 


 
Special Offers from Schaeffer's Trading Partners