Herbalife Options (HLF): Unusual Trading Activity

| September 27, 2012 | 0 Comments

HLF OptionsOptions in fitness and health products company Herbalife (HLF) are showing tremendous trading activity this morning.

All three major indices started with fractional moves higher to start the day.  And then… bam!  They took off like a rocket. 

But what’s interesting is that shares in HLF are outpacing even the large market move.

HLF is up over 5% so far today at $47.52. 

And option traders believe it’s going even higher.

But before we take a look at the options activity, let’s first dig a little deeper into this name.

If you don’t know, Herbalife sells weight-management, nutrition, energy and fitness products.  It operates 1.9 million distributorships in more than 70 countries across the globe, with its direct sales channel accounting for more than $2 billion in revenue a year.

So, what’s going on today?

Back in May, Greenlight Capital’s CEO David Einhorn came out with some controversial questions about Herbalife’s accounting disclosures.  The only thing is… it wasn’t clear at the time if his concerns were legitimate. 

However, traders didn’t want to chance it, so they sold the stock off over 8% in a matter of hours. 

But now, a few traders are thinking the opposite. 

With Einhorn getting ready to speak at another conference very soon, some traders are speculating he will flag HLF again, but this time on the positive side.  And at least one option trader is going crazy buying call options, positioning for a longer term bounce.

As a result, our tracking system continues to light up with straight-out call option buying. 

During the mid-morning session today, one trader came in and bought 11,000 of the HLF October $52.50 strike call options at an average price $1.15.

Don’t forget, buying calls with no other positions is a speculative play that Herbalife will not stay down in the weeks ahead.  And the trader’s profit potential for this trade is unlimited as there’s no limit to how high HLF can go. 

To sum it up, I think this option trader is looking for a bounce on HLF with David Einhorn as the catalyst.

Let’s watch to see if he’s right!

For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research.  It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio.  Click here to subscribe for free.

Safe Trading,

Marcus Haber

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.