Iron Condor on Herbalife

The price of Herbalife ($HLF) has been relatively stable the last couple of weeks with the Icahn / Ackman tug-o-war in a tense tie.   The historical volatility has been running around 26, but the IVs on the weekly options are relatively rich with the average running around 50.    Currently a 35.5/37/39/40.5 iron condor is offering a .575 credit (midpoint) for the 12-April-13 options.  The risk reward ratio is about 1.75 to 1 with a worst case loss of .95 and best case profit of around .55 (usually you have to go a little lower than the midpoint price to get the position) with less than 4 days to go.   Even KPMG bailing as an auditor hasn’t seemed to shake this week’s standoff.

Chart from Schwab StreetSmart Edge

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