[Options] Turning the KEY

Sean McLaughlin
December 6, 2023

Today's trade has me thinking of this classic corny joke from Pulp Fiction:

One of the strongest sectors out there right now is banking. Particularly regional banks. And as we head into year-end, the catch-up trade is real and money managers chasing alpha are looking into some beaten-up names in the regional banks to get the juice they need to make their year.

This plays in favor of today's trade which has a yawning gap to fill which is likely to overshoot on the upside if a broader market melt-up is in the cards (narrator: we think it is).

Check out this chart of KeyCorp $KEY:

We like the odds of this gap filling and more.

Here's the Play:

I like buying $KEY June 15 calls for less than $1.00. This is a defined risk bet, where the most I can lose is this premium I pay today.

That said, I'll look to close the trade down for a loss if either of these two conditions are met:

  1. if $KEY closes below $12 per share, or
  2. if our calls lose 50% of their value.

If the "catch up" trade doesn't have enough oomph, then theta will work against us and trip up condition #2.

Meanwhile, if $KEY trades up to $16.50 per share (fills the gap), then I'll look to take a little off the table to recapture my original investment capital and hold the rest to see what the market has in store for us.

If you have any questions on this trade, please send them here.

If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.

~ @OptionsSean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.

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