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KeyCorp strategy locks in sale price

David Russell (david.russell@optionmonster.com)

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.

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