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Tony Zhang's Morgan Stanley Trade

Tony Zhang recommended on CNBC's "Options Action" a bullish options trade in Morgan Stanley (NYSE: MS).

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Tony Zhang recommended on CNBC's "Options Action" a bullish options trade in Morgan Stanley (NYSE:MS). He thinks that the stock could benefit from the pick up in rates on the long end of the curve.

The stock is one of the strongest among the major banks from the relative strength perspective, easily outperforming the sector since the beginning of March, said Zhang. He believes that the stock is poised to break out above its resistance at $53.

Zhang explained that the company has built a very well-diversified business around its wealth management division and the only major headwind it has are interest rates. The steepening of the curve that happened over the past month is going to reduce some of Morgan Stanley's headwinds.

To make a bullish bet, Zhang wants to buy the October $52.50/$57.50 call spread for a total cost of $1.75. The trade breaks even at $54.25 or around 2.5% above the closing price on Friday. If the stock moves to $57.50 or higher at the October expiration, the trade is going to reach its maximal profit of $3.25.