Unusual Options Activity: Morgan Stanley (MS)

Wall Street megabank Morgan Stanley (MS) has been trending higher in recent months, but is still down 12 percent over the past year. One trader sees shares trending higher in the coming weeks.

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  • That’s based on the March $88 calls. With 21 days until expiration, 5,093 contracts traded compared to a prior open interest of 147, for a 35-fold rise in volume on the trade. The buyer of the calls paid $0.98 to make the bullish bet.

    Morgan Stanley shares recently traded for about $85.50, so shares would need to rise about 3 percent for the option to move in-the-money.

    The option’s strike price is well under the stock’s 52-week high of $99.20.

    The bank has had a mixed year, with earnings off by 32 percent, and revenues are up just 2 percent. Plus, with only a 17 percent profit margin, it’s not the best performing Wall Street bank.

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  • However, shares are inexpensive at 17 times forward earnings.

    Action to take: With shares trending higher since last October, investors may want to use the short-term pullback to accumulate shares. At current prices, Morgan Stanley pays a 3.9 percent dividend.

    For traders, the March $88 calls are well priced for high double-digit returns in the coming weeks. Traders should look for a quick jump higher to take profits.


    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 company mentioned in this article.

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