Last month, Morgan Stanley reported surprisingly strong earnings, in a season when former Wall Street leader Goldman Sachs surprised the market with its weakness. Shares shot up 11 percent on the news. Since then, they've drifted lower, almost entirely erasing the gains they made on the back of the better earnings.
Now it seems someone is betting that the shares will keep sliding:
Bearish options trading suggests some investors are willing to wager on a steep decline in shares of Morgan Stanley in the next 2 1/2 months.
Susquehanna says an opening investor purchased 34,000 bearish puts that grant the right to sell shares for $16 by October’s expiry; the stock hasn’t traded that low since the fall of 2008.
“This investor is likely betting on a significant drop in shares or looking to protect long underlying holdings,” Susquehanna says.
A thought on this: Although $16 seems very low and the 2008 date is scary, this isn't really an uber-bearish bet. Shares of Morgan Stanley are down 18.25% over the last three months. You don't need much of an acceleration of that trend to get all the way down from $21 to $16 by October.
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