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Morgan Stanley Finance LLC has launched $500,000 in aggregate principal of Dual Directional Jump Securities featuring an auto-callable option, priced on July 20, 2026, and maturing on January 21, 2028. Fully guaranteed by Morgan Stanley, these securities offer potential early redemption at 110% of principal if the S&P 500 closes at or above 7,457.69 on July 21, 2027. Otherwise, maturity payments are linked to the index's performance. Designed for fee-based advisory accounts, these principal-at-risk notes expose investors to significant downside risk if the index falls below 80% of its initial level.
Key Points
- NYSE Ticker: MS-PQ
- Morgan Stanley Finance LLC issued $500,000 of structured notes with automatic early redemption triggered if S&P 500 reaches 7,457.69 on the first determination date
- Original issue price of $1,000 per security with estimated pricing value at $988.20; early redemption payment of $1,110 per security if triggered; maturity on January 21, 2028
- Investors risk full principal loss if index closes below 5,966.152 (80% of initial level) at maturity; upside and absolute return participation rates both set at 100%
Security Structure and Dual Directional Payoff Features
These structured notes combine debt and equity-linked components under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes program. Each unit has a stated principal of $1,000 and was priced at par on issuance, with an estimated value of $988.20 on July 20, 2026. The dual directional payoff allows returns based on whether the S&P 500 Index moves up or down from the strike level of 7,457.69, creating asymmetric payoff profiles at maturity depending on market direction.
The notes include an auto-callable mechanism that triggers early termination if conditions are met. On July 21, 2027—the first determination date—if the S&P 500 closes at or above 7,457.69 (100% of the initial level), the securities will be redeemed early on July 26, 2027, at $1,110 per security, providing an 11% positive return if the index maintains or exceeds its strike level.
Maturity Payment and Downside Protection
If not auto-called, maturity payments on January 21, 2028 depend on the S&P 500's closing level on January 18, 2028. If the final index level exceeds 7,457.69, investors receive principal plus upside participation at 100% of the index's gain, offering full exposure to market appreciation.
If the index declines but remains above the downside threshold of 5,966.152 (80% of initial level), the absolute return participation feature activates. Investors receive principal plus a positive return equal to the absolute value of the index's percentage decline multiplied by 100%, effectively capping losses and providing a potential positive return of up to 20% despite moderate declines.
Principal-at-Risk and Maximum Loss Exposure
These notes carry significant principal-at-risk characteristics. If the final index level falls below 5,966.152, maturity payments are calculated by multiplying the principal by the ratio of final to initial index levels, resulting in a one-to-one downside participation. Investors lose 1% of principal for every 1% the S&P 500 declines beyond the 20% threshold.
The documentation warns that in severe market downturns, payments could be substantially less than principal or even zero. Specifically, if the index drops approximately 80% or more to 1,491.54 or below, investors risk losing their entire initial investment. These notes are not principal-protected and require investors to accept the possibility of total capital loss.
Valuation and Embedded Costs
Morgan Stanley Finance LLC estimated the securities' value on pricing date using proprietary models incorporating market inputs such as volatility, interest rates, and credit spreads. The difference between the $1,000 issue price and $988.20 estimated value reflects issuance, structuring, selling, and hedging costs borne by investors.
The firm uses an internal funding rate likely lower than secondary market credit spreads, providing economic advantages to the issuer and contributing to the valuation gap between issue price and estimated value.
Credit Risk and Guarantee Details
These unsecured obligations of Morgan Stanley Finance LLC are fully and unconditionally guaranteed by Morgan Stanley. All payments depend on Morgan Stanley's creditworthiness, exposing investors to default risk. The securities lack collateral backing and are not secured by underlying reference assets.
The notes are not bank deposits, are uninsured by the FDIC or any government agency, and are not guaranteed by any bank, underscoring that investors bear Morgan Stanley's credit risk without traditional deposit protections.
Intended Investors and Distribution Method
Offered exclusively to investors in fee-based advisory accounts, Morgan Stanley & Co. LLC acts as distribution agent. The company purchased the entire $500,000 issuance and resells to an unaffiliated dealer at $996.50 per security for distribution at $1,000 per security to fee-based advisory clients.
Instead of traditional sales commissions, the agent earns $1,750 in fees ($3.50 per security), with Morgan Stanley retaining $498,250 after compensation. This approach targets sophisticated investors with existing advisory relationships charging asset-based fees.
Index Tracking and Determination Dates
The securities track the S&P 500 closing levels on multiple determination dates. The strike date of July 17, 2026 established the initial index level of 7,457.69, serving as the reference for performance calculations. The first determination date on July 21, 2027 triggers potential early redemption if the index reaches or exceeds the strike level.
The final determination date is January 18, 2028, with maturity three days later on January 21, 2028. This structure provides approximately 18 months of S&P 500 exposure, with an 11% early redemption profit opportunity if the index maintains its strike level within one year. Using closing levels on specific dates reduces manipulation risk and ensures clear payment metrics.
Risks and Suitability Considerations
The disclosure highlights that these securities suit investors willing to risk principal and forgo current income in exchange for absolute return participation and potential early or maturity payments exceeding principal. The notes pay no regular interest, differing from conventional income securities.
The filing stresses that these notes involve risks beyond ordinary debt securities, including complexity and significant principal loss potential if the S&P 500 declines sharply. The SEC and state regulators have neither approved nor disapproved these securities or their disclosure documents.
Issuance Details, CUSIP, and Regulatory Filings
These securities are dated July 20, 2026, with an original issue date of July 23, 2026. The pricing supplement was filed under Securities Act Rule 424(b)(2) on July 22, 2026, as Pricing Supplement No. 17,513 under Morgan Stanley Finance LLC's Registration Statements Nos. 333-293641 and 333-293641-01. The CUSIP is 61781GQ53 and ISIN US61781GQ533.
The notes are unlisted, traded over-the-counter through fee-based advisory channels, limiting secondary market liquidity and price transparency. They are issued under Morgan Stanley Finance LLC's Series A Global Medium-Term Notes shelf registration program, allowing multiple structured note offerings under one registration.
