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Update on Herbalife Spread Positions

On Monday I submitted an article to Seeking Alpha -, Why Herbalife Should Move Higher From Here

I recommended buying calendar spreads at one strike below the current price of Herbalife (HLF) and two strikes above the current price so that you didn’t much care which way the stock moved as long as it didn’t go absolutely crazy on the downside.

In a Terry’s Tips portfolio, we bought Feb-13 – Jan2-13 calendar spreads at the 35, 37.5, 40 and 42.5 strikes when the stock was trading at $28.57.  On Tuesday and Wednesday, the stock moved up by about $2.50 and we added another calendar at the 45 strike.

The company has made a public announcement today refuting the claims of Bill Ackman, and the stock has been gyrating in both directions, although not by huge margins.  As I write on my lunch break on Thursday, the stock is trading at $40, down about a dollar for the day.

Our little portfolio has gained 20% after commissions since Monday, and the risk profile graph shows that we should pick up even more tomorrow as long as the stock doesn’t fll by more than another $2 by the close tomorrow:

I am a little tempted to close out the positions and take a 20% gain for the week, but the break-even range seems large enough that I will wait another day and  hope for another 10% or so.

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