Thursday, January 23, 2014

Herbalife (HLF) - Stock Gaps Down Hard; Volatility Explodes. But We Knew that a Week Ago, Right?

HLF is trading $64.68, down 12.0% with IV30™ exploding up 20.7%. The Symbol Summary is included below.

Provided by Livevol

This is a follow up to the article I posted on 1-17-2014 (six days ago). You can read that post by clicking on the title below:

Herbalife (HLF) - Volatility Rise Crosses Threshold... Is HLF at Risk... Again?

The bullet points of the prior blog were pretty simple:
"This is a vol note, specifically a rising vol note where I see the IV30™ breaching a level that in general has meant bad news for HLF. [] The 4.5% [volatility] pop [today has pushed the IV30™ above a threshold level for HLF"

Well, it turns out that ~85% level was a key risk indicator (at least this time).  The volatility chart that drew the conclusion is included below.

Provided by Livevol

The prior note read:

We can see quite clearly how the implied has been rising as the stock has been dipping. But, note the level of the implied as of today's close. That 87% level was last breached on 12-20-2013, right in the middle of a stock drop from $45.68 down to $26.06 in just a few days.

We can even see that the level reached in the IV30™ is above the level of the last earnings release. But I think earnings shouldn't be out for another several weeks. Hmm...

Today, HLF is down 12%, and the implied has risen back to that threshold level.  Risk is here and getting realized in the stock price.

Here's the news today:
BOSTON, Jan 23 (Reuters) - Massachusetts Senator Edward Markey is asking for more information about the business practices of Herbalife Ltd, his office said on Thursday, making him the most prominent lawmaker to call for an investigation into claims the nutrition company is running a pyramid scheme.

Herbalife shares tumbled more than 12 percent after Markey, a Democrat, said he had written to the U.S. Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC) and to Herbalife itself to try to obtain more information.

Source: Reuters via Yahoo! Finance Massachusetts Senator calls for probe into Herbalife, shares drop

Finally, the Options Tab from today is included below.

Provided by Livevol

That's it... HLF is in flux and that threshold volatility is still in play.

This is trade analysis, not a recommendation.

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1 comment:

  1. You've done it again Ophir...You called BBY and now HLF...nice work! Amazing how well then options market prognosticates.