Morgan Stanley (MS) Bears Don't Buy Earnings-Induced Rally

Morgan Stanley puts are trading at an accelerated clip today

Oct 17, 2014 at 10:34 AM
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It's been a strong day on the corporate earnings front, and financial firm Morgan Stanley (NYSE:MS) is no exception. At last check, the stock was up 3.2% at $33.56, after posting an 87% rise in third-quarter profit -- easily beating analysts' consensus bottom-line estimate. However, not everyone is convinced the security can sustain this post-earnings momentum. In fact, put volume is running at a 26% mark-up to the average intraday pace this morning, with a number of speculators betting on a quick retreat for the shares.

Drilling down, the weekly 10/24 33-strike put has seen the most action in MS' options pits, with 1,472 contracts on the tape. More than three-quarters of these contracts have traded at the ask price, and volume outstrips open interest, pointing to the purchase of new positions. Amid today's rally, delta on the put has dropped to negative 0.36 from negative 0.58 at last night's close, suggesting a decreased probability the option will be in the money at next Friday's close, when the weekly series expires.

From a wider sentiment perspective, today's trend toward puts only highlights the withstanding trend witnessed in MS' options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, Morgan Stanley's (NYSE:MS) 50-day put/call volume ratio of 0.68 ranks in the bearishly skewed 82nd annual percentile.

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