Herbalife Ltd. (HLF) Bear Places Huge Eleventh-Hour Bet

One put buyer needs Herbalife Ltd. (HLF) to take a turn for the worse by tomorrow's close


Published on Apr 16, 2015 at 2:23 PM
Updated on Apr 20, 2015 at 5:32 PM

Even though Herbalife Ltd. (NYSE:HLF) is 1.2% higher today at $44.81, puts are dominating its options pits. The contracts are crossing at 1.6 times the average intraday rate, mostly due to one trader's ambitious bet. Specifically, someone bought to open 7,000 April 45 puts for $1.09 apiece. Doing the math, this means the trader spent $763,000 (number of contracts * premium paid * 100 shares per contract) to bet on the shares falling further below $45 by tomorrow's close, when the contracts expire.

Seeing traders so focused on puts is uncommon in HLF's options pits. In fact, the equity's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.01, and ranks in the 6th annual percentile. This means HLF's short-term options traders are far more call-skewed than usual.

Elsewhere, analysts are split on the stock, issuing two "strong buy" ratings, versus two "holds." Also worth noting is HLF's short interest, which accounts for over 36% of its float. It would take these bearish traders eight sessions to buy back their bets, at normal daily volumes.

Looking at the charts shows Herbalife Ltd. (NYSE:HLF) has performed well in 2015. The shares have added 18.9% year-to-date, and in the past three months, have outpaced the S&P 500 Index (SPX) by 43 percentage points. What's more, HLF is on pace to notch a second consecutive close north of its 200-day moving average -- a feat not accomplished since last July.

HLF put/call open interest

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