Investment bank Morgan Stanley (MS) is up 20% over the past year, slightly lagging the overall stock market. One trader sees shares heading far higher in the months ahead.
That’s based on the October $120 calls. With 98 days until expiration, 4,009 contracts traded compared to a prior open interest of 124, for a 32-fold rise in volume on the trade. The buyer of the calls paid $0.64 to make the bullish bet.
Morgan Stanley shares recently traded for about $103, meaning the stock would need to rise by $17, or about 17%, for the option to move in-the-money.
Shares are already breaking to new 52-week highs right now by clearing $103, so further upside in the coming weeks and months is possible. Currently, shares trade at 15 times forward earnings, a sign on the value side that shares could be poised to continue rallying.
Action to take: Investors may like shares here as a momentum play. With MS shares breaking higher, investors could likely see low-double-digit returns in the coming months. At current prices, Morgan Stanley also pays a 3.3% dividend with a history of growth.
For traders, the October $120 calls are somewhat aggressive, but could trade for a far higher price in the coming weeks, as shares are likely to continue their uptrend.
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.