Nov 17 Shares of dietary supplement
retailers tumbled in heavy trading volume on Tuesday, spurring a
surge in options hedging activity for those stocks even though
fears they would be mentioned in a U.S. Department of Justice
lawsuit did not materialize.
GNC Holdings’ shares tumbled as much as 27.1 percent
to hit their lowest in four years, but closed 6.4 percent lower
at $29.07. Daily volume was the largest ever according to
The DOJ called a press conference at noon Eastern (1500 GMT)
about criminal and civil actions aimed at stemming the sale of
unproven nutritional supplements.
No specific companies were named in the announcement, but
traders then sold off shares of GNC, Vitamin Shoppe,
Natural Health Trends Corp and Herbalife,
betting on their declines. Options volume activity also surged.
None of those companies were named by the DOJ. Executives at
USPlabs LLC and S.K. Laboratories, which do not trade publicly,
face criminal charges related to the sale of unlawful dietary
Vitamin Shoppe tumbled as much as 10.4 percent to hit its
lowest in more than five years, closing down 4.9 percent at
$28.19. Volume was the highest for any session going back to
Feb. 25, 2014.
Natural Health Trends, which closed Monday at its highest
since early June 2000, fell as much as 23.9 percent. It ended
down 15.4 percent at $45.47 on its highest volume in more than
At its session low, Herbalife was down as much as 6.3
percent with volume at its highest since early August. It closed
1.5 percent lower at $54.43.
The announcement of the DOJ news conference also triggered a
spike in options hedging activity with volume in options of
those four stocks at several times the average for a day.
GNC options volume was at 35,000 contracts, or eight times
what is normal while Herbalife options volume hit 31,000
contracts, or 2.6 times what is normal, according to options
analytics firm Trade Alert data.
But not all of the trading in these shares was bearish. GNC
drew a noticeably large bullish bet where a trader bought 2,700
call options, betting that the shares would close higher than
$30 by Friday, or 3.2 percent above their Tuesday close.