What's behind call action in KeyCorp

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One investor is apparently using options to time an exit from KeyCorp.


Our Depth Charge monitoring system detected the purchase of 16,000 September 5 puts for $0.13 and the sale of an equal number of September 7 calls for $0.80, resulting in a net credit of $0.67.

This was probably the work of an investor who owns shares in the Cleveland-based lender. Writing calls obligates the trader to sell KEY for $7 if it remains above that level through expiration.

Including the credit, the exit price would be $7.67. The position loses value below $7, down to $5.67--roughly the same level where the stock bounced in September. (See our Education section)

Based on the expiration date, it appears that the investor bought shares near the low last summer and is now using the options to fix the exit price. Delaying the sale can also result in a lower tax rate.

KEY fell 2.37 percent to $7.43 yesterday and has lost almost 8 percent of its value in the last month.

Overall option volume was 13 times greater than average in the session, according to the Depth Charge.



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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