Unusual Options Activity In Morgan Stanley $MS

| November 11, 2015 | 0 Comments

MS OptionsUnusual Options Activity In Morgan Stanley $MS 

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason…  Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week…

Morgan Stanley $MS is one of the largest financial institutions in the world.  The $68 billion company provides institutional banking and wealth management services.  For a good description of the company, follow the link.

$MS is trading at $35.13, down 8% for the year.  That’s 14% below the 52-week high and 17% above the 52-week low.

So what does unusual options activity in MS tell us?

Like most companies in the financial sector, MS has had an underperforming year.  Some of it is simply sector rotation… that is, stock buyers have not yet rotated into financials this year.  Plus, low interest rates have certainly hurt the bottom line at many banks.

However, MS has seen a surge in buying this month.  With the Fed highly likely to raise rates in December, investors are once again taking an interest in financial companies.  Like many other banks, MS appears to be trading at a discount.

Here’s the deal…

This week, a large amount of puts traded in MS options.  Keep in mind, a put option makes money when the underlying stock goes down before its expiration date.  Conversely, selling a put option is beneficial when a stock goes higher or stays neutral.

To be more specific, traders sold over 9,000 32.50 puts expiring on December 24th.  These puts were sold for $0.43, resulting in total collected premium of close to $400,000.  The volume far exceeds the open interest, so this is definitely opening action.

Here’s the chart of $MS:

unusual option activity, a chart of $MS

MS shares dropped well below the 50-day moving average during the August correction.  The stock has just recently broken through that resistance and has shot all the way up to $35.

The share price only has to remain above $32.50 by roughly the end of the year for the trade to be fully profitable.  With the 50-day moving average sitting at $33, MS would have to break through significant support to get to the breakeven point.

The trader is likely assuming that banks are going to hold their ground with the December rate hike nearing.  Banks may not continue to rally, but the downside is probably limited given the benefit of higher interest rates on their bottom lines.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis

Note:  Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com.  You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.