MS – Morgan Stanley – Bearish investors dominated options activity on global financial services firm, Morgan Stanley, today as shares of the underlying stock declined 1.85% to trade at $25.52 as of 3:05 pm (ET). MS shares are currently trading a scant $0.76 over the stock’s 52-week low of $24.76 attained back on May 25, 2010. One near-term pessimistic player purchased a ratio debit put spread to brace for continued bearish movement in Morgan Stanley’s shares through June expiration. The investor picked up 5,000 puts at the June $24 strike for a premium of $0.14 apiece, and sold 10,000 puts at the lower June $22.5 strike for a premium of $0.06 each. The net cost of the ratio spread amounts to $0.02 per contract. Thus, the put player makes money if shares of the underlying stock decline another 6.00% to breach the effective breakeven point on the spread at $23.98. Maximum available profits of $1.48 per contract amass if Morgan Stanley’s shares plunge 11.8% from the current price of $25.52 to settle at $22.50 by June expiration on Friday.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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