Herbalife Ltd. (HLF) Bears Bank On Multi-Year Lows

Herbalife Ltd. traders expect a move down to levels not seen since late 2012

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Published on Dec 30, 2014 at 10:45 AM
Updated on Apr 20, 2015 at 5:32 PM

Herbalife Ltd. (NYSE:HLF) has been hovering around $38 for the past couple of weeks, and is currently perched at $38.45. That's a far cry from where the stock started the year, with the shares losing more than half their value in 2014. In yesterday's options trading, one group of speculators wagered on continued downside through the start of 2015.

Taking a quick step back, HLF puts crossed at a 30% mark-up to the average daily pace on Monday, and outnumbered calls by a nearly 3-to-1 margin. Looking more closely, buy-to-open activity was detected at the February 27.50-strike put -- which was also the equity's most active option. In other words, these bearish bettors are eyeing a move below $27.50 for the shares by the close on Friday, Feb. 20, when the back-month series expires. This represents territory not explored since December 2012.

On the sentiment front, the preference for puts over calls witnessed yesterday is par for the course. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HLF has registered a put/call volume ratio of 2.63. This reading not only indicates close to three puts have been bought to open for every call in recent weeks, but it also stands higher than 77% of all similar metrics from the past year.

Pessimism is by no means limited to the options pits, though. Roughly 39.5% of Herbalife Ltd.'s (NYSE:HLF) float is sold short, which would take nearly four weeks to cover, at average daily trading volumes.


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