Put Spread on HLF on 3/24/2014

Herbalife Ltd. (HLF) sells weight management, healthy meals and snacks, sports and fitness, energy and targeted nutritional products, and personal care products worldwide.

The company offers science-based products in four principal categories, including weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition.

The weight management product portfolio includes meal replacement, protein shakes, drink mixes, weight loss enhancers, and healthy snacks. The targeted nutrition products comprise dietary and nutritional supplements containing herbs, vitamins, minerals, and other natural ingredients. The energy, sports, and fitness portfolio consists of the products designed to meet the nutritional needs of athletes, such as Herbalife24 product line, which enables athletes to customize their nutrition program based on personal training and competitive demands throughout the day.

The outer nutrition products include skin cleansers, toners, moisturizers, facial masks, shampoos and conditioners, body-wash items, and a selection of fragrances for men and women, as well as anti-aging and other related products. The company also sells literature and promotional materials, including international business packs, sales tools, and educational materials, as well as Internet based tools, such as BizWorks, a customizable retail Website for its members.

Herbalife Ltd. offers its products through retail stores, sales representatives, sales officers, and independent service providers. Shares have formed a bearish "flag" as China investigates the company's pyramid sales force. This morning shares are up after its competitor, NuSkin (NUS), was fined in China for its pyramid sales force, something that amounted to a slap on the wrist for the stock. Also, Carl Icahn, had proposed 3 directors to HLF's board of directors, which the company has approved them now. We believe once the short-covering with the recent news subsides, shares will resume their downward move.

52-Week Trading Range: $34.72 - $83.51

Last Trade: $52.70

Here is the trade: 

Trade Buy 1 April $52.50 Put at $3.30 Sell 1 April $47.50 Put at $1.75 For a net debit of $1.55 Profit/Loss Analysis Breakeven at $50.95 Maximum profit is $345.00 at strike of $47.00 Maximum loss is ($155.00) at strike of $53.00 Closing Summary Sold 1 April $52.50 Put at $0.00 Bought 1 April $47.50 Put at $0.00

Position closed on 4/21/2014 at price of $0.00 with a -100.00% loss in 27 days.

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