Healthy Call Option Trade in Herbalife (HLF) This Morning

We love Herbalife Ltd (HLF)., and Bill Ackman’s well known involvement in the shorting of HLF and his recent selling of 28,000 of the 45,000 puts he owned.  Now today, there was big CALL buy in Herbalife Ltd (HLF).

Just a little while ago we saw a trader buy 2,416 September $55 calls.  Most of those were bought at the ask of $1.07.  Those calls are now asking $1.23.  This makes for a transaction value in the area of $258,000, a nice sized bet in this battle ground stock

Herbalife Ltd (HLF) is currently trading at $50.84 up 1.35, on average at best volume.  HLF has a 52 week high of $83.51, and a low of $48.26 on the year.  It’s traded 1.2 million shares already this morning by.   It’s average daily volume is 3.9 million.  This could just be speculation that Bill Ackman is unwinding his short in the company, or it could be speculation Soros is upping his ownership stake in the company, or could even be putting together a buyout deal for the company.

herbalife logo HLF

Herbalife Ltd (HLF) announces quarterly earnings on October 27 so clearly this is not a play on earnings leakage.  These calls are now 1.25 to 1.23, last traded at $1.23. We like this trade given it’s size, the nature of the business and the players involved, so we jumped in as soon as we could at $1.15.

Only 5 analysts currently follow Herbalife Ltd (HLF).  The average rating on HLF is a “BUY” and the average price target is $81.75.  HLF is currently profitable with a PE of just 11 or so, with analysts expecting $1.53 per share profit for this quarter, and an annual profit of $6.27.

While you never want to bet the farm on any one option play, this play in HLF is one you may want to put a little extra into.  It was over sold, it was shorted in a big way by Ackman, and if the covering floodgates open, this bad boy will be an easy 10 bagger. Best of luck.