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Herbalife Ltd. (HLF) Makes Investors Observer Momentum Plays List

Posted: Friday, March 19, 2010 8:37 AM EDT

Herbalife Ltd. (NYSE: HLF) closed yesterday at $44.14. So far the stock has hit a 52-week low of $13.11 and 52-week high of $45.18. Herbalife stock has been showing support around 42.77 and resistance in the 44.89 range. Technical indicators for the stock are Bullish and S&P gives HLF a neutral 3 STAR (out of 5) hold rating. HLF appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a May '10 45 covered call for a net debit in the $42.09 area. That is also the break even stock price for this trade. This covered call has a 64 day duration, provides 4.64% downside protection and a 6.91% assigned return rate for a 39.43% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the HLF Jan '11 30 Call and selling the May '10 45 call for a $13.05 debit. The trade has a 64 day life and would provide 2.47% downside protection and a 14.94% assigned return rate for an 85.00% annualized return rate (for comparison purposes only). Herbalife has a current annual dividend yield of 1.84%. [FBB-Seven Summits Research]

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