Weekend Trader Alert
November 27, 2022
Open Positions Update
- Please extend the scheduled time-stop date on the Illinois Tool Works (ITW) March 17, 2023, 200-strike call to Monday, December 12.
The following is this week's recommendation:
Morgan Stanley (MS)Place a limit order to buy the Morgan Stanley (MS) February 17, 2023 87.50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, November 25, this option was offered at $7.30. MS closed at $90.91 on Friday, November 25.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Tuesday, December 27, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Bank stock Morgan Stanley (MS) is forming a cup-and-handle pattern that is currently flagging. The shares are back above their 200-day moving average, with a confluence of rising moving averages below the support price.
There’s additional support at MS’ year-to-date anchored VWAP (volume-weighted average price) -- the first time there hasn’t been a failure at this level all year. December and January are the second and third most bullish months of the year, from a seasonality perspective, making now the time to strike with MS.
A further breakout could force money managers to buy shares of MS, and the 95- and 105-strikes could act as magnets.
Digging deeper, the stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.13, and is rolling from near all-time high exposure levels. In other words, this suggests a healthier-than-normal appetite for long puts of late.
Now looks like an ideal time to speculate on the stock's next moves with options, given its Schaeffer's Volatility Index (SVI) of 26% stands in the low 10th percentile of readings from the past year. This means options traders are pricing in low volatility expectations for MS right now.
Our recommended February 87.50-strike call has a leverage ratio of 8.2, and will double in value on a 12.3% pop in the underlying shares.
Most Recent Recommendations
The information contained herein is intended solely for the individual subscribers, is not intended for institutional investment organizations, and is not legal to be rebroadcast. Please click here for full disclaimer details.
Limitation on Schaeffer's Investment Research (SIR) liability: SIR liability, whether in contract, tort, negligence, or otherwise, shall be limited in the aggregate to direct and actual damages not to exceed the fees received by SIR from Subscriber. SIR will not be liable for consequential, incidental, punitive, special, exemplary or indirect damages resulting directly or indirectly from the use of or reliance upon any material provided by SIR. Without limitation, SIR shall not be responsible or liable for any loss or damages related to, either directly or indirectly, (1) any decline in market value or loss of any investment; (2) a subscriber's inability to use or any delay in accessing SIR website or any other source of material provided by SIR; (3) any absence of material on SIR website; (4) SIR failure to deliver or delay in delivering any material or (5) any kind of error in transmission of material. SIR and Subscriber acknowledge that, without limitation, the above-enumerated conditions cannot be the probable result of any breach of any agreement between SIR and Subscriber.