Herbalife Ltd. (HLF) is a nutrition company that sells weight management, targeted nutritional products, and personal care products worldwide.  HLF has been one of the most debated stocks in the market over the past year. The debate centers on claims by activist investor Bill Ackman that HLF’s operations fit the definition of a pyramid scheme. Ackman announced a large short position in the stock with a price target of zero. Activist investor Carl Ichan then announce he was taking a large stake in the company and since then the two have battled it out on CNBC on a few occasions. I don’t know what the future holds for HLF but on the announcement of a civil probe by the Federal Trade Commission into the company’s operations the stock has plummeted. Today a trader bought 1,700 HLF April 47.5 Puts for $2.49 indicating they belive the stock will head lower. Let’s breakdown this trade, this trader has the right but not obligation to sell 170,000 shares of stock at $47.50 and is paying around $300,000 for this right. With a breakeven of around $45.00 this trader is thinking the stocks tests at least that low.

Hewlett-Packard Company (HPQ) together with its subsidiaries provides products, technologies, software, solutions and services to individual consumers, small-and medium-sized businesses (SMBs), and large enterprises.  A trader took a HUGE bullish stance today when a trader bought over 10,000 HPQ march 30.5 Calls for $.24.  This trader has the right, but not obligation to buy $1 million shares of HPQ at $330.50 between now and the end of the week.  Calls are bought for one of two reasons, speculation to the upside or a hedge against a short stock position.  I think this trader expects to see more upside, so I bought the HPQ march 30.50 Calls for $.24

My Risk: $24 per 1 lot
My Reward: Unlimited
Targets: Sell 33% at $.40, Sell 33% at $.50, Sell 33% at $.65

Endocyte, Inc. (ECYT) is a bio-pharmaceutical company that develops targeted therapies for the treatment of cancer and inflammatory diseases.  One way to calculate how much a stock can move is to look at the ATM Straddle to get two Measured Move Targets.  The ECYT ATM April 15 Straddle is priced at $6.80 implying the stock can move to either $21.80 or $9.20 by April expiration.  Obviously, by the high implied volatility we can tell that there will be a drug announcement in April.  One trader thinks the stock can move to $23.25 as we saw a trader buy ECYT April 22.5 calls for $.75.

Their Risk: $75 per 1 lot
Their Reward: Unlimited
Their Breakeven; $23.25

ConocoPhillips (COP) is an integrated oil and gas company with operations around the globe. The company’s stock is currently trading around $67.95 in a 52 week range of $56.38-$74.59. The stock has been underperforming the market this year with shares falling by around 3.75% year to date. Options action in COP during this morning’s trading session would suggest that traders believe this trend will reverse and that the stock will be strong through April expiration. Earlier this morning a trader bought 9,106 COP Apr 70 calls for $0.35. This is an extremely bullish bet that also represents volume more than 3.5 times the average daily option volume in COP. The COP chart is technically not in bullish territory according to the Ichimoku Cloud. However, the stock is very close to the top of the cloud and could be poised for a breakout. With shares of COP approaching breakout territory and strong bullish order flow we believe that COP is setting up well for a long position.

Trade: Buying the COP Apr 70 Calls for $0.35
Risk: $35 per 1 lot
Reward: Unlimited
Breakeven: $70.35

The iShares MSCI South Korea Capped ETF (EWY) seeks to track the investment results of an index composed of South Korean equities. The chart looks weak and it seems as if it wants to break the Ichimoku Cloud to the downside. Today, a trader bought 2,500 EWY April 58 Puts for $.85. Puts are bought for 1 of 2 reasons, speculation to the downside or as a hedge against a long stock position. With the chart looking so weak, I think the trader thinks there is more potential downside and with the breakeven of this trade at $57.15 a trader thinks that EWY can take out the 52 week lows. I have no position in this stock right now, but will be looking to get short if I notice more bearish activity.

Herbalife Ltd. (HLF) is a worldwide nutrition company selling a variety of health and nutrition products through a multi-level network of independent distributors. The company’s stock is currently trading around $57.45 in as 52 week range of $34.72-$83.51. The stock is down over 27% year to date and shares fell more than 13% over the past week as the Federal Trade Commission launched a civil probe into Herbalife’s operations. This announcement has long been expected since activist investor Bill Ackman announced a large short position and accused HLF of being a pyramid scheme last year. Options action in HLF during today’s trading session suggests traders believe this trend will continue through the end of the week. Earlier in the session a trader bought 1,623 HLF Mar 56 puts for $0.84. While this may not be a large trade in terms of normal HLF volume this is a rather large bet for such a short term time frame. With shares of HLF breaking down further on the cloud we believe that this trade sets up well on a reward to risk ratio for a short set up to the end of the week.

My Trade: I bought the HLF Mar 56 puts for $0.84
Risk: $84 per 1 lot
Breakeven: $55.16

Citrix Systems, Inc. (CTXS) is a cloud computing company that develops software for enterprise and online services. The company’s stock is currently trading around $60.85 in a 52 week range of $51.18-$77.16. The stock has been under performing the broader market with shares falling around 3.7% year to date. Options action during today’s trading session would suggest that traders believe this trend will continue through June expiration. Earlier today a trader bought 2,000 CTXS Jun 65 Calls for $2.825. This trade is a bullish bet that CTXS continues its recent move higher. Although the stock is down on the year it has rallied over 6.6% in the past month. The stock is now trading above the Ichimoku Cloud after breaking to the upside earlier this month. With bullish order flow and a strengthening chart we believe CTXS is setting up well for a long position.

Trade: Buying the CTXS Jun 65 Calls for $2.85
Risk: $285 per 1 lot
Reward: Unlimited
Breakeven: $67.85

Community Health Systems, Inc. (CYH) is an operator of healthcare facilities in the U.S. The company’s stock is currently trading around $35.45 in a 52 week range of $35.36-$51.29. The stock has been massively underperforming the market and has made new 52 week lows during today’s trading session. As the stock makes new lows we are seeing large put buyers in CYH.  Earlier in the session a trader bought 6,652 CYH May 39 puts for $4.66. Now a total of 10,000 contracts have traded on that line and today’s volume will create the largest line of open interest in any contract in May expiration. These are extremely bearish bets that indicate the high level of bearish conviction this trader has in CYH. The stock is trading well below the Ichimoku Cloud and the future cloud is sharply downward sloping. With a weak chart and bearish order flow we believe that CYH is signaling for a short position.

Trade: Buying the CYH Apr 34 Puts for $0.95
Risk: $95 per 1 lot
Breakeven: $33.05