Herbalife (HLF) Exposed!

atticus · Feb 16, 2013

Quote from zdreg:

Icahn then sold European-style puts of corresponding expirations and size. European options can be exercised only upon expiration or the date at which the corresponding American calls described are exercised. <http://www.cnbc.com/id/100465961?__source=yahoo|headline|quote|text|&par=yahoo>
i thought european options could only be could only be exercised at maturity. the above seems to differ.

"The use of options limits risk"

CNBC would have a better shot at a successful moon landing than getting the trade right. Icahn is holding a synthetic, so essentially a delta1 product. He's long spot.

cdcaveman · Feb 16, 2013

i agree with staying away from headline stocks.. and CNBC... talking heads.. back to research...

newwurldmn · Feb 16, 2013

Quote from oldtime:

yes, they acknowledge this, that's why the cboe likes him, but they said this is not just a special one time deal, but his regular modus operandi

he's paying a ten percent premium for this luxury. I don't think that's the case.

newwurldmn · Feb 16, 2013

Quote from zdreg:

Icahn then sold European-style puts of corresponding expirations and size. European options can be exercised only upon expiration or the date at which the corresponding American calls described are exercised. <http://www.cnbc.com/id/100465961?__source=yahoo|headline|quote|text|&par=yahoo>
i thought european options could only be could only be exercised at maturity. the above seems to differ.

Yes that's true. The more important issue is that the puts are cash settled. It is dumb to have an American cash settled option unless the goal is to "force a trade." There's no real exercising in a European option. It just settles to the max(k-s,0)

oldtime · Feb 17, 2013

Quote from newwurldmn:

he's paying a ten percent premium for this luxury. I don't think that's the case.

ok,you know more about it, I'm just talking about the may options, he claimed on the phone his intentions were to excercise in 30 days

on Bloomberg, a guy who runs a website called 13d something said there is no doubt he will excercise in about 30 days

nobody talked about the purpose or function of the jan 2015 europeans

that's over my head

cdcaveman · Feb 17, 2013

whatever you know in this particular case will not help you.. ultimately you can not know what their true intentions are..

it would be surprising to me that the stock goes up for a while.. ackman holds.. Carl makes a killing dumps, and Ackman rides it down after... and they laugh at the cnbc'ers all the way to the bank..

i think there is a sort of "sensationalism" attraction that is just bad all together for a trader in stuff like this.. emotional ride.. nothing resembling quantitative trading..

oldtime · Feb 17, 2013

Quote from cdcaveman:

whatever you know in this particular case will not help you.. ultimately you can not know what their true intentions are..

it would be surprising to me that the stock goes up for a while.. ackman holds.. Carl makes a killing dumps, and Ackman rides it down after... and they laugh at the cnbc'ers all the way to the bank..

i think there is a sort of "sensationalism" attraction that is just bad all together for a trader in stuff like this.. emotional ride.. nothing resembling quantitative trading..

hey caveman, I'm not trying to make money off this one, that's way out of my league, it's just for entertainment and educational purposes

but you bring up a good point

what does the conservative investor that's caught long in the middle do?

I think they said Fidelity is the largest long holder

hard kore · Feb 17, 2013

Carl Icahn filed a 13D disclosing a ~13% synthetic stake in Herbalife.

There are three possible reasons that Carl Icahn might want to own half a billion dollars worth of Herbalife stock:

1) as a value investment in a company with strong cash flows and a beaten-up stock price.

2) as a toehold in preparation for launching a tender offer to take the company private.

3) to fuck with Bill Ackman.

forget the first 2 reasons and keep the third.

oldtime · Feb 17, 2013

Quote from hard kore:

Carl Icahn filed a 13D disclosing a ~13% synthetic stake in Herbalife.

There are three possible reasons that Carl Icahn might want to own half a billion dollars worth of Herbalife stock:

1) as a value investment in a company with strong cash flows and a beaten-up stock price.

2) as a toehold in preparation for launching a tender offer to take the company private.

3) to fuck with Bill Ackman.

forget the first 2 reasons and keep the third.

I think everybody knows it is reason number three

but I don't know where you get this "half a billion dollars."

Like he said, 'If everything goes to hell I'll lose 11 milliom, minus what I can get from the options."

Pekelo · Feb 17, 2013

"Pershing Square has underperformed the U.S. stock market for two straight years after fees, even with the big short promotion of Herbalife in December,"

http://www.forbes.com/sites/nathanv...bably-not-fun-for-pershing-squares-investors/