Bulls can't get enough of Herbalife

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For the second time in a week, the bulls are active in Herbalife.

On Nov. 26 , optionMONSTER's Heat Seeker tracking program detected buying in the January 80 calls for $1.83. The weight-loss stock has been pushing higher, and those calls are up almost 50 percent.

Today's paper is hitting one month later: About 4,000 February 70 calls were sold for $8.90, and a similar number of February 75 calls were bought for $6.45. Volume was below previous open interest at the lower strike, so it appears that an existing long-call position was closed and rolled to the higher strike.

The investor collected a credit of $2.45 by making the adjustment and will keep making profits if the stock continues to rally. The delta was reduced from 0.63 to 0.51, meaning that the trader recovered more than one-quarter of the initial capital at risk in return for surrendering less than one-fifth of the upside exposure. (See our Education section for more on how to trade more efficiently with options.)

HLF rose 4.31 percent to $74.95 in afternoon trading and is up more than 120 percent so far this year. It's been riding a global wave of obesity, expanding into Latin America and Asia while fighting bearish bets by hedge fund manager Bill Ackman along the way. Earnings have beaten expectations for at least three straight quarters.

Total option volume in HLF is nearly quadruple its daily average so far in the session, according to the Heat Seeker. Calls outnumber puts by a bullish 4-to-1 ratio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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