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Option Brief: Optimism has been high on Morgan Stanley (NYSE:MS) this week, as evidenced by a bullish brokerage note and accelerated call activity in the stock's options pits. Specifically, SocGen on Monday upped its price target for MS, while Tuesday's call volume nearly doubled typical daily levels. Although MS surrendered its foothold atop the $30 mark to start the week, yesterday's speculators bet on the stock to retake this round-number mark over the next five-plus weeks -- a time frame that includes the company's quarterly earnings report.
More than 14,950 contracts were exchanged at the equity's May 30 call, three-quarters of which crossed at the ask price -- including a massive block of 9,147. Implied volatility ticked higher, and open interest soared overnight, collectively pointing to the initiation of fresh bullish positions. At last night's close, delta for the call stood at 0.44, suggesting a 44% chance the option will be in the money at the close on Friday, May 16, which is when the options expire.
On the charts, MS has spent 2014 chopping between $29 and $33.50, with a move to the high end of this range occurring in the wake of its mid-January earnings beat. More recently, though, the stock was seen lingering near $29.81 -- just north of its 40-week moving average.
Off the charts, the Federal Reserve yesterday found that eight of the largest U.S. banks -- including Morgan Stanley (NYSE:MS) -- must increase their capital levels by roughly $68 billion. Additionally, as noted earlier, the financial firm will report earnings ahead of next Thursday's open. MS has performed well following the release its last three quarterly reports, enjoying solid moves to the upside in the subsequent sessions. For Morgan Stanley's first quarter, Wall Street is calling for a profit of 60 cents per share, a penny shy of the company's year-ago results.