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Homeoptions actionDid Ackman break even on his Herbalife short? Don't bet on it

Did Ackman break even on his Herbalife short? Don’t bet on it

Several recent reports suggest billionaire investor Bill Ackman has done the unthinkable: break even on his Herbalife trade. But a closer look at the numbers indicates Ackman is still in the red on one of the most closely watched trades in Wall Street history.

The Herbalife saga started back in December 2012, when Ackman announced that his hedge fund, Pershing Square Capital Management, was betting against Herbalife by shorting more than $1 billion worth of the company's shares.

Jonathan Fickies and Patrick Fallon | Bloomberg | Getty Images

Let's generously say that Ackman started shorting when the stock was trading at $50 per share, which would mean that he shorted at least 20 million shares. Then a bunch of rival billionaires took contrasting views, Ackman brawled with Carl Icahn on CNBC and the stock soon soared to $80 a share, costing Ackman millions in paper losses—to say nothing of his bruised ego.

Fast forward to Oct. 2 , when Ackman cried the investment equivalent of "Uncle!" and released a shareholder letter in which he announced he reduced his short-equity position by 40 percent by buying a bunch of "over-the-counter put options." (For those who haven't been watching "Options Action," put options increase in value when a stock falls).

Read More Ackman takes aim at Herbalife for China dealings

This means that Ackman must have covered about 8 million shares at around $75, which is roughly where the stock was trading around the time of the letter. That would mean a loss of about $200 million (8 million times $25). Keep that number in mind. We'll revisit it later.

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