Options Trade: Bearish Bet on Herbalife Ltd. (HLF)


Herbalife Ltd.’s (NYSE:HLF) stock has been one of the most volatile in the market after being mired with a stream of allegations about possible illegal dealings by billionaire Bill Ackman. The billionaire is also reported to hold one of the largest Short positions in the stock, demonstrating the bearish nature of the stock.

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Yesterday, the company’s Option Calls also experienced unusual activities in terms of traded volumes. Option volumes for the day were up two times, normal volumes with Puts outnumbering Calls on a 2:1 ratio. Option call trades also saw one of the traders placing September 67.50-strike calls up for sale for $1.75, a move, according to CNBC’s Dan Nathan, that outlines the bearish nature of Herbalife Ltd.’s (NYSE:HLF) stock.

“But there was one trade in particular shortly after the opening when the stock was $60.40 about a 1000 of the September 67.50 calls. They looked to be sold to open at a $1.75. It could be a long looking to take some yields in, over the next two months or so. To me, it looked like a pretty negative bet for the most part,” said Mr. Nathan.

A one-day chart for the company also shows the level of volatility in the company in particular to a day where the company traded at a $1 range for the best part of the day and then fell off, as of the close of business.

Herbalife Ltd. (NYSE:HLF) financial flexibility has also been put task in the recent past after the company issued a convertible bond to get proceeds for carrying out buyback of its stock in the market. The company has also suspended its dividend offer with a view of using the proceeds to buy stock to cover the company’s trading’s in the market.

“We also know that this company issued a convertible bond back in April. They were using the proceeds to buy-back stock. They also suspended their dividend to buy-back stock. They also did the same right before their first earnings miss in 2008,” said Mr. Nathan.

Disclosure: none

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