Why bull is launching big bet on KeyCorp

By David Russell,

Shutterstock photo

KeyCorp has been fighting its way higher for three months, and one investor is betting that it has more room to run.

optionMONSTER's Heat Seeker tracking program detected the purchase of 10,000 June 10 calls for $0.50 and the sale of 10,000 June 8 puts for $0.25, resulting in a net cost of $0.25.

The resulting position will simulate owning 1 million shares in the regional lender at a fraction of the cost, generating large profits if KEY rallies above $10 and losing money below $8. It will expire worthless if the shares close between those two levels on expiration.

KEY KEY is up 2.43 percent to $9.26 in morning trading and has risen 24 percent since the beginning of December. The shares appear to be finding support above previous resistance at $9 and have been following their 50-day moving average higher (black line on chart at right), which some traders may consider evidence of a bullish trend.

Its last financial report on Jan. 25 crushed estimates, with per-share earnings more than twice forecasts as loan losses dropped.

The bullish trade on KEY pushed total option volume in the name to 9 times greater than average, according to the Heat Seeker.

(Chart courtesy of tradeMONSTER)

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

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

This article appears in: Investing Options
Referenced Stocks: KEY

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