IB Options Brief: Morgan Stanley (MS), iShares MSCI Brazil Index Fund (EWZ) & McDermott International, Inc. (MDR)
Morgan Stanley Options Active As JPM Errs
Today's Tickers: MS, EWZ & MDR
MS ñ Morgan Stanley
JPMorganís trading loss troubles, which brought the shares down nearly 10.0% this morning, weighed heavily on Morgan Stanley as well. Shares in the financial services firm earlier fell 5.8% to an intraday and four-month low of $14.70. Options traders expecting MS to bounce back next week picked up cheapened upside exposure in the form of May expiry calls. The bullish plays may be winning propositions in the event of a near term recovery in the price of the underlying.
Traders purchased around 2,100 of the May $14 strike calls for an average premium of $1.05 apiece, and picked up more than 4,800 calls at the higher May $15 strike at an average premium of $0.36 each. Premiums on the $14 and $15 strike calls have moved higher during the session as shares in the name recovered off the morning lows. Strategists holding in-the-money contracts with one week remaining to expiration face average breakeven prices of $15.05 and $15.36, respectively.
EWZ ñ iShares MSCI Brazil Index Fund
Shares in the EWZ, currently up 0.75% on the day at $57.53, may extend gains in the near term by the looks of bullish positioning in the June expiry options this morning. Call options on the fund are most active out at the June $60 strike, where more than 36,000 contracts changed hands against open interest of 9,244 positions. Most of the calls appear to have been purchased for an average premium of $0.80 apiece.
The single largest stake, a block of 29,707 calls, was picked up just before 11:00 a.m. ET this morning. Call buyers stand ready to profit at expiration next month in the event that shares in the Brazil ETF rally 5.7% to top the average breakeven price of $60.80. Shares in the ETF are down 2.6% year-to-date, and have lost more than 18.0% of their value since reaching the March 2, 2012, six-month high of $70.74.
MDR ñ McDermott International, Inc.
The Houston, Texas-based offshore oil and gas contractorís shares increased as much as 17.2% to $11.59 today after the company reported better-than-expected first-quarter earnings. Shares are currently at their highest since the start of the month on the earnings report, an upgrade to buy from hold at BB&T Capital Markets and reports the company may start buying back stock, but it looks like at least one options player is wary the gains may be temporary.
A burst of put buying in the front month kicked in at the start of the session, with some 11,000 contracts in play at the $11 strike against open interest of 2,488 positions. Most of the puts appear to have been purchased at a premium of $0.35 apiece. Put buyers make money if shares in McDermott International decline 5.5% from the current price of $11.27 to breach the breakeven price of $10.65 by expiration next week.
Note: The material presented in this commentary is provided forinformational purposes only and is based upon information that isconsidered to be reliable. However, neither Interactive Brokers LLC norits affiliates warrant its completeness, accuracy or adequacy and itshould not be relied upon as such. Neither IB nor its affiliates areresponsible for any errors or omissions or for results obtained from theuse of this information. Past performance is not necessarily indicativeof future results.
This material is not intended as an offer or solicitation for thepurchase or sale of any security or other financial instrument.Securities or other financial instruments mentioned in this material arenot suitable for all investors. Any opinions expressed herein are givenin good faith, are subject to change without notice, and are onlycorrect as of the stated date of their issue. The information containedherein does not constitute advice on the tax consequences of making anyparticular investment decision. This material does not take into accountyour particular investment objectives, financial situations or needsand is not intended as a recommendation to you of any particularsecurities, financial instruments or strategies. Before investing, youshould consider whether it is suitable for your particular circumstancesand, as necessary, seek professional advice.
View Caitlin Duffy's post archive >