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Morgan Stanley has bounced back from lows in June and July, but remains well below the all-important technical 200-day moving average near $16. Morgan Stanley has more or less treaded water during the last 12 months without gaining or losing much (with more than one move higher and lower in between).
With an average analyst target price of $20.35, Morgan Stanley appears to have a lot of upside relative to the other banks. The price-to-earnings ratio reflects relative higher optimism in Morgan too. Morgan is expected to bring home about 90 cents in earnings this year making the earnings multiple slightly higher than 16.
Part of the higher premium may come from the higher dividend yield Morgan offers. This stock currently has an annualized dividend of 20 cents, yielding 1.37%. Short interest is 1.5%, indicating a near zero level of interest from short sellers.
I would prefer to sell a November expiration covered call, but October is as close as we can get. The October $15 strike calls can be sold for about 80 cents. With a current stock price of $14.90, the maximum possible return is 90 cents for a gain of 12% in less than two months. The maximum risk is $14.10 per share. Dividend payments may positively impact the results.