HLF – Herbalife, Ltd. – It looks like one cautiously optimistic options trader initiated a delta neutral hedge on the maker of weight management, nutritional supplement and personal care products this afternoon ahead of the firm’s third-quarter earnings announcement scheduled for release after the close on November 1, 2010. Herbalife’s shares are currently down 1.25% to stand at $63.20 as of 3:45 p.m. in New York trading. The investor appears to have picked up 58,000 Herbalife shares at a price of $63.76 each as well as 2,000 calls on a 0.29 delta for a premium of $1.45 per contract. The long stance taken in HLF shares suggests the trader is bullish on the stock and expecting shares to climb higher. But, the put options serve as downside protection in case the investor’s inclinations fail to align with the performance of the stock going forward. The put options will be well worth the added premium if earnings are disappointing and shares head lower ahead of November expiration day.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers