Morgan Stanley (MS) has erased early gains and is now off 34 cents to $13.80 in active trading of 24.5 million shares. Call options on the stock are busy for a second day. Yesterday’s flow created more than 53,000 in new open interest in Oct 17 calls (see 5/15 color), as a massive block was bought for 83 cents per contract and tied to delta neutral execution hedge. 136,000 calls and 26,000 puts have traded on the investment bank today. Much of the call volume is due to one massive premium purchase, in which the investor bought 30,000 August 16 calls, 35,000 October 18 calls, and 35,000 Jan 19 calls, paying $1.95 in combined premium for the deep out-of-the-money contracts. The blocks of calls are tied to 2.9 million shares at $14 and possibly part of a stock replacement strategy and/or a bet the stock will begin to recover some of the 33 percent loss suffered since late-March.
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.