Friday, January 17, 2014

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

HLF closed Friday trading at $70.20, down 2.0% with IV30™ up 4.5%. The Symbol Summary is included below.

Provided by Livevol

Herbalife Ltd. is a global nutrition company. The Company sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products as well as personal care products. It distributes and sells its products through a network of independent distributors, using the direct selling channel.

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.

Let's start with the Charts Tab (two-years) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Provided by Livevol

On the stock side we see a wild ride with a bunch of gaps down and abrupt moves up but also which, when all is said and done, has simply seen the stock go from $57.18 to $70.20 in two-years.

But it's the volatility that caught my eye today.  The 4.5% pop has pushed the IV30™ above a threshold level for HLF.  Let's turn to the IV30™ chart in isolation, below.

Provided by Livevol

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...

Finally, the Options Tab is included below.

Provided by Livevol

We can see across the top that Feb is priced to 86.62% while May is priced to 76.59%.  That volatility difference reflects the risk in earnings which should be announced in ~3-4 weeks.  For now though, the volatility is rising, and it's reached a level that brings back... not so good memories for HLF.

This is trade analysis, not a recommendation.

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