Someone apparently thinks that Herbalife will have a very Happy
optionMONSTER's Heat Seeker detected the purchase of 10,000 January
80 calls for $1.82 and $1.83. Volume surpassed previous open
interest of 6,627 contracts, which indicates that new money was put
lock in the price where the weight-loss company can be bought,
letting investors cheaply position for a rally. The contracts also
have the potential to generate significant leverage from a modest
move in the underlying stock.
The activity is especially noteworthy because HLF has never traded
over $75, much less $80. This way the investor won't miss a
breakout into new record territory while limiting the amount of
capital at risk if it drops. (See our
HLF is down 1.15 percent to $69.74 in afternoon trading but has
more than doubled so far this year. It's benefited from strong
earnings, especially overseas, as obesity sweeps the globe. But
even more important was the massive short bet placed by Bill
Ackman, which resulted in a famous conflict with Carl Icahn. (See
Short interest is still a hefty 29 percent of the float, so today's
paper could possibly be the work of bears looking to hedge that
Total option volume is almost triple the daily average, with calls
outnumbering puts by a bullish 4-to-1 ratio.
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