Regional bank KeyCorp (KEY) is up over 50% in the past year, nearly double the returns of the overall stock market. One trader sees shares heading even higher in the coming weeks.
That’s based on the September 20 $17.50 calls. With 24 days until expiration, 7,355 contracts traded compared to a prior open interest of 115, for a 64-fold rise in volume on the trade. The buyer of the calls paid $0.25 to make the bullish bet.
KeyCorp shares recently traded for about $17, meaning shares would need to rise by about $0.50, or 3%, for the option to move in-the-money. Shares are trending higher and are at a 52-week high.
Operationally, the bank has seen revenues decline nearly 1%, and earnings are off by about 5%, reflecting the current high interest rate environment.
Despite the big move higher over the past year, shares trade at 15 times forward earnings. The bank could benefit as interest rates start to come down, and lending activity increases.
Action to take: Momentum investors may like shares here, as they likely can continue higher, even with the stock already at a 52-week high. KeyCorp also pays a 5% dividend at current prices.
For traders, the September $17.50 calls have just a few weeks to play out, but could see high-double-digit returns or even into the triple-digits should shares trend higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.