Unusual Options Activity: Morgan Stanley (MS)

Wall Street megabank Morgan Stanley (MS) is down nearly 10 percent over the past year, as financial stocks have been hit by rising interest rates. One trader is betting on a bounce higher in the coming months.

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  • That’s based on the February 2024 $87.50 calls. With 86 days until expiration, 25,470 contracts traded compared to a prior open interest of 201, for a 127-fold rise in volume on the trade. The buyer of the calls paid $0.95 to make the bullish bet.

    Morgan Stanley recently traded just under $80, so they would need to rise about $8, or 10 percent, for the option to move in-the-money. The strike price is still well under the stock’s 52-week high of $100.99.

    A drop in IPO activity and stock market trading has led to a 9 percent drop in earnings, even as overall revenues ticked higher by nearly 2 percent. At current prices, shares trade for an estimated 12 times forward earnings.

    Action to take: Investors may like shares here, as the stock seems to have bottomed in October and has started trending higher. Plus, at current prices, Morgan Stanley pays a 4.2 percent dividend.

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  • For traders, the February calls could move in-the-money on a big enough rally in shares. And at their current price, the options could see a triple-digit move. Traders should buy now, and look to take some profits by the end of the year to profit from a seasonal rally.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.