Will Ashworth
5 min read
Returning from the Juneteenth holiday respite, the markets are expected to head lower on Friday due to global geopolitical uncertainty stemming from the Israel-Iran conflict.
Typically, on Fridays, I’ll discuss the unusual options activity from the previous day’s trading. I can’t do that in light of the holiday and the markets being closed.
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However, there were plenty of options action in the first three days of the week, so I’ve scoured the unusual options activity from Monday, Tuesday, and Wednesday, to find three stocks or ETFs that jump out for one reason or another.
Monday led off the week with 945 unusually active options--defined as those with Vol/OI ratios of 1.24 or higher and expiring in seven days or longer--with the calls getting 61% of the action compared to 39% for the puts.
Tuesday’s put/call ratio was 41%/59%, another bullish day. On Wednesday, we saw more of the same, with calls accounting for 61% of the 1,065 unusually active options on the day, indicating that investors have yet to become concerned about the problems in the Middle East.
That could change shortly. Let’s get to the three that have captured my attention.
Have an excellent weekend.
Morgan Stanley’s (MS) Dec. 17/2027 $80 put had the highest Vol (volume)/OI (open interest) ratio on Monday at 80.04.
The volume of 8,004 was approximately half of the investment bank’s 30-day average, making it a significant amount. Even more compelling because it was a single trade for 8,000 of the put contracts at 12:12 p.m. on Monday.
Admittedly, when I first examined the top 100, I had a hard time understanding why someone would buy or sell this particular put, given that it is 39% out of the money (OTM).
If you’re bullish about Morgan Stanley’s future, you likely wouldn’t be buying the 8,000 put contracts to go long for downside protection. With a DTE (days to expiration) of 915, you probably wouldn’t be selling them short, either, given the annualized return on the premium is just 2.6% [$5.10 bid price / $80 strike price*365 / 915].
However, when you think about it, the S&P 500 average dividend yield is currently 1.27%, so you’re getting double that, without a near-term capital outlay, although you will need the cash on hand or margin equivalent should you have to buy the 800,000 shares of Morgan Stanley in December 2027.
