KeyCorp strategy locks in sale price

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KeyCorp has pulled back after a strong earnings report, and one investor is afraid of further downside.

optionMONSTER's Depth Charge monitoring system detected the purchase of 12,015 March 7 puts for $0.21 and the sale of an equal number of March 8 calls for $0.81. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

The transaction generated a credit of $0.60 and is tantamount to selling 1.2 million shares in the Cleveland-based lender. The investor has now locked in a maximum exit price of $8.60 and a minimum of $7.60.

KEY fell 1.64 percent to $8.39 on Friday and has been moving sideways since the subprime-mortgage crash of 2008. The stock gapped higher on Oct. 18 after profit and revenue exceeded expectations but has been drifting lower since.

The collar strategy let the investor fix a sale price while delaying the transaction until March 2013. (See our Education section for more on how calls and puts can be used to manage positions.)

Total option volume was 5 times greater than average in Friday's session.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: KEY

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