Herbalife Options (HLF): Unusual Trading Activity

| May 1, 2012 | 0 Comments

HLF OptionsOptions in fitness and health products company Herbalife (HLF) are starting to show increased unusual option trading activity.

All of the three major indices are trading incredibly higher today.  However, shares in HLF are getting taking out back and beaten like something out of a movie.

And when I say beaten down, I’m talking about down 19%!  Over a very short time frame, the stock has moved from $59.00 down to $56.50.

Option traders dream for moves like this because it gives them plenty of opportunity no matter what direction they think the stock will move.

So, just exactly what are option traders doing?

Back to that in a minute… first let’s dig deeper into Herbalife.

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

So, what’s going on today?

This morning after the open, Greenlight Capital CEO David Einhorn came out with some introversial questions.

He started to ask questions about HLF’s company disclosures while on a conference call.

The only thing is, we don’t how whether he has a legitimate complaint.  But traders are assuming that he’s asking these questions, knowing the stock could decline and allow him to take on a new short position in the stock.

Whatever it is, it’s working.

Option traders are going crazy.  They think this move on one investor’s comments is overdone.

So they’re positioning for a quick bounce back.

Our tracking system continues to light up with option traders buying straight out call options.

The buying seems relatively even  across  the HLF May $57.50 call strike all the way up to the HLF May $70 call strikes.

Don’t forget, buying calls with no other positions, is speculation that HLF will not stay down 19% in the long term.  But rather bounce back like a spring in the short term.

To sum it up, I don’t think these option traders are looking for anything except a short term bounce on this stock which has been annihilated so far today.

Let’s watch to see if their right!

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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.