Tony Zhang Sees Unusual Options Activity In Morgan Stanley

On CNBC's "Options Action," Tony Zhang said Morgan Stanley (NYSE:MS) traded pretty actively on Monday as over 80,000 contracts traded. That is more than two times the average daily volume.

While the stock was down over 3% on Monday, the 30-day front-month implied volatility rose by more than 20%. So a trader decided to take advantage of elevated implied volatility by selling 19,000 contracts of the October $90 puts for $1.30. The trade accounts for almost a quarter of all the contracts traded on Monday in Morgan Stanley.

These puts are about 9% out of the money and if the stock stays above $90 at the October expiration, the trader is going to make around $2.5 million. If Morgan Stanley closes below $90 at the October expiration, the trader will have to buy the stock at $90.