Herbalife Optimist Secures Insurance Policy Ahead of Earnings

Today’s tickers: HLF, REE, XLB, BIDU, DAL, RSH & MOT HLF  - Herbalife, Ltd. –  It looks like one cautiously optimistic options trader initiated a delta neutral hedge on the maker of weight management, nutritional supplement and personal care products this afternoon ahead of the firm’s third-quarter earnings announcement scheduled for release after the close on November 1, 2010. Herbalife’s shares are currently down 1.25% to stand at $63.20 as of 3:45 p.m. in New York trading. The investor appears to have picked up 58,000 Herbalife shares at a price of $63.76 each as well as 2,000 calls on a 0.29 delta for a premium of $1.45 per contract. The long stance taken in HLF shares suggests the trader is bullish on the stock and expecting shares to climb higher. But, the put options serve as downside protection in case the investor’s inclinations fail to align with the performance of the stock going forward. The put options will be well worth the added premium if earnings are disappointing and shares head lower ahead of November expiration day. REE  - Rare Element Resources, Ltd. –  The Canada-based company that was the target of bullish options trading just 24 hours ago has transformed into a hub of bearish activity. Shares in Rare Element Resources, which own the Bear Lodge mine in Wyoming, fell as much as 27.05% from yesterday’s high of $13.71 to an intraday low of $10.00. Despite the substantial decline today the current price of the stock is still up roughly 260% since August 20, 2010, when shares were around $2.80 each. Pessimistic players took to the options field on REE to place bearish bets on the stock. Investors expecting shares to continue lower picked up put options and sold call options in the November and December contracts. Traders picked up approximately 2,500 puts at the November $10 strike at an average premium of $1.12 each, and purchased another 1,500 puts at the lower November $7.5 strike for an average premium of $0.37 apiece. Put buyers make money if REE’s shares slip beneath the average breakeven points at $8.88 and $7.13, respectively, by November expiration. Other traders sold 1,200 calls at the November $12.5 strike to receive an average premium of $1.07 per contract. Call sellers at this strike are indicating they do not expect Rare Element Resources’ shares to recover above $12.50 before the contracts expire next month. Investors short the calls keep the full…