Todd Horwitz's Herbalife Options Trade

Todd Horwitz of Bubba Trading suggested on Bloomberg Markets that investors should consider a bearish options strategy in Herbalife Ltd. HLF.

The company is going to report earnings on Thursday and he thinks it's going to miss expectations. He wants to use an options strategy he calls a "broken wing butterfly" to make money in case the stock doesn't move much or it moves lower.

Related Link: Pershing Sticking To Its Short On Herbalife

Horwitz wants to sell three contracts of the February 61 straddle, buy three contracts of the February 63 call and buy four contracts of the February 59 put for a total credit of $3.50.

If the stock trades above 62.17 by Friday expiration, the trade is going to lose money and it can maximally lose $2.50. The trade also loses money, if the stock trades between $59.83 and $56.50 and its maximal loss is also $2.50 and it is going to be realized if the stock closes at $59 on Friday. Below $56.50, Horwitz is going to make money on the extra put he bought.