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