Option volume has ramped up today on KeyCorp (KEY), with activity rising well beyond the usual level on both the call and put side of the tape. Taking a closer look at some of the major block trades on this regional banking issue, it appears that a single spread strategist is responsible for a healthy portion of this option volume.

Specifically, the trader purchased a block of 10,000 June 10 calls for $0.50 each, and simultaneously sold 10,000 June 8 puts for $0.25 each. The result was a net debit of $0.25 per pair of contracts -- which means the speculator can begin collecting profits on those purchased calls if KEY rallies beyond $10.25 by June expiration.

Analyst Upgrades

• Disney (DIS) to buy from hold at Wunderlich.
• Pike Electric (PIKE) to outperform from market perform at FBR Capital.
• Kindred Healthcare (KND) to overweight from equal weight at Barclays.
• UBS (UBS) to hold from sell at Canaccord.
• Avery Dennison (AVY) and Take-Two (TTWO) to buy from neutral at BofA/Merrill.
• Mercer (MERC) to outperform from market perform at Raymond James.

Analyst Upgrades

• Goldman upgraded CSX (CSX) to neutral from sell.
• General Cable (BGC) was upgraded to buy from hold at KeyBanc.
• Morgan Stanley upgraded Chart Industries (GTLS) and Dresser Rand (DRC) to overweight from equal weight.
• Blackrock (BLK) was upgraded to outperform from neutral at Macquarie.
• Credit Suisse upgraded Zions Bancorp (ZION) to neutral from underperform and GameStop (GME) to outperform from neutral.
• Honeywell (HON) was upgraded to outperform from sector perform at RBC Capital.
• Panera Bread (PNRA) was upgraded to buy from neutral at SunTrust.

Option traders appear to be setting up for a bullish move on ProLogis (PLD). Traders plowed into 1,067 new call option contracts -- 2.81 times the average volume -- on the stock on Thursday. And we know that traders were eager to get into this trade because 95% of the trades came in on the ask price.

ProLogis looks like it formed a bottom in early July and has since formed a higher low in August. The stock closed Thursday at $10.92, down 0.18% during the past month.

Analyst Upgrades

• BMO Capital upgraded EOG Resources (EOG) to market perform from underperform. The firm has a $100 target on the stock.
• Morgan Joseph upgraded Glimcher Realty (GRT) to buy from neutral with a $6.50 target. The firm believes the company has solved most of its liquidity problems while its dividend yield is very attractive.
• Citigroup upgraded AmerisourceBergen (ABC) to buy from hold.
• Lincoln Electric (LECO) was upgraded to gradually accumulate from hold at Soleil.
• BMC Software (BMC) was upgraded to outperform from neutral at Credit Suisse.
• Mercer (MERC) was upgraded to outperform from market perform at Raymond James.

Analyst Upgrades

• Piper Jaffray upgraded MWI Veterinary Supply (MWIV) to overweight from neutral and raised its target for shares to $50.
• UBS believes Nokia (NOK) is well positioned for smartphone growth. The firm upgraded shares to buy from neutral and has a $19.55 price target.
• Wells Fargo upgraded Cedar Fair (FUN) to outperform from market perform. After the company's merger agreement with Apollo was terminated, the firm thinks the company will be able to refinance its debt, removing an uncertainty.
• Darden (DRI) was upgraded to outperform from neutral at Cowen.
• KeyCorp (KEY) was upgraded to buy from neutral at Goldman.
• Bank of Ireland (IRE) was upgraded to hold from sell at RBS.

Analyst Upgrades

• Citigroup upgraded JPMorgan (JPM) to buy from hold on valuation as it finds the risk/reward on shares attractive following yesterday's sell-off. Citi keeps a $48 price target on the stock.
• Oppenheimer upgraded International Game Tech (IGT) to outperform from perform as it believes fundamentals for slot suppliers will improve over the next two years. The firm has a $29 price target on the stock.
• SunTrust believes Perry Ellis (PERY) is now positioned to deliver stronger margins and significant reductions in charge-backs. Shares were upgraded to buy from neutral.
• Nordstrom (JWN) was upgraded to neutral from underperform at BofA/Merrill.
• Tyson Foods (TSN) was upgraded to buy from hold at BB&T.
• Consol Energy (CNX) was upgraded to buy from neutral at Goldman.

Last week, JPMorgan Chase & Co. (JPM) led off the coming parade of earnings from the big banks when it reported better-than-expected fourth-quarter and full-year earnings, though its revenue fell short of estimates.

Plenty more earnings from the financial sector are due out this week. Analysts surveyed by Thomson Reuters anticipate fourth-quarter earnings growth from American Express Co. (AXP), Bank of New York Mellon Corp. (BK), Hudson City Bancorp Inc. (HCBK), SLM Corp. (SLM) and US Bancorp (USB).

TheStreet.com's Jim Cramer says the sooner banks repay TARP, the more likely they will power higher in 2010.

The Federal Reserve wants higher stock prices. That's all I can think of when I see that it wants repayment plans into place for the big banks such as Bank of America (BAC) (Cramer's Take), PNC (PNC) (Cramer's Take), Citigroup (C) (Cramer's Take), Fifth Third (FITB) (Cramer's Take), Wells Fargo (WFC) (Cramer's Take), Regions Financial (RF) (Cramer's Take), SunTrust (STI) (Cramer's Take) and KeyCorp (KEY) (Cramer's Take), all names that haven't repaid the Troubled Asset Relief Program yet.

Why would these plans bring about higher prices?

With about a 50% run up since January, the stock market is poised for a dip. That is the conventional wisdom being touted by the analysts.

The idea is a good one, but what do you mean by a dip? This is where it experts disagree as usual. Let's take a sampling of some leading pundits:

• Sam Stovall, chief economist at Standard & Poor's, said: "But now (referring to continued high unemployment) that economic waters appear more choppy and third quarter earnings session is about to begin, are investors less inclined than they were a few weeks back to buy stocks on market dips?"

Analyst upgrades:

• FBR Capital upgraded McAfee (NYSE: MFE) to Outperform from Market Perform after channel checks indicated the company's September quarter deal flow has been stronger than expected. FBR raised its target on shares to $50 from $41.
• Thomas Weisel upgraded Adtran (NASDAQ: ADTN) to Overweight from Market Weight, citing increased wireless backhaul capex spending by Tier-1 carriers. The firm raised its target to $32 from $21.
• RBC Capital upgraded Brunswick (NYSE: BC) to Outperform from Sector Perform as the firm thinks the company no longer has liquidity risk and can generate significant profits by 2012. The firm set a $17 target on the stock.
• Bronco Drilling (NASDAQ: BRNC) was upgraded to Hold from Underperform at Jefferies.
• LSI Corp. (NYSE: LSI) was upgraded to Buy from Hold at Deutsche Bank.
• UBS upgraded U.S. Airways (NYSE: LCC) and UAL Corp. (NASDAQ: UAUA) to Buy from Neutral.

TheStreet.com's Jim Cramer says many stocks, considered frothy at one time, have turned into good turnaround stories.

Here's still one more version of a short-seller's nightmare. What happens when froth turns to investible? What happens when you see behavior that clearly indicates froth and then, somehow, the fundamentals change, and the stock takes off?

We have seen that recently in so many situations that it is pretty dazzling. It was one thing to see Genworth (NYSE: GNW) (Cramer's Take) back from the dead on its own.

"Even among the broad-based market carnage of the past year, regional banks with heavy real estate exposure have been notably poor performers," notes turnaround expert George Putnam.

In The Turnaround Letter, he explains, "While investors are still wary of this group, there are cases where the market has overreacted and the stocks will eventually rebound dramatically." Here, he looks at four favorite regionals.

"Many regional banking stocks are now trading at a small fraction of their 'book value.' In more normal times, most banks will trade for two to three times book value and sometimes more.

KeyCorp (NYSE: KEY) stepped into the earnings spotlight this morning, announcing that its second-quarter loss checked in at 69 cents per share (68 cents per share excluding charges). A year ago, the bank lost $2.71 per share in the second quarter. Although the results were better than those from a year ago, they were not better than the consensus estimate, which called for a loss of 41 cents per share.

The company also announced that it was cutting the amount of preferred shares that it plans to exchange by 71%. KeyCorp's CEO (Henry Meyer III) stated that the company's results "reflect the weak economic environment and the steps that it has taken to address issues in credit quality, strengthen capital and control costs." Like many regional banks, KeyCorp suffered thanks to the credit crunch; even though the bank was not a major player in the subprime-mortgage fiasco. The company added that loan-loss provisions were $850 million, which was 31% greater than a year ago.

Analyst upgrades:

• Keefe Bruyette upgraded KeyCorp (NYSE: KEY) to Outperform from Market Perform due to valuation and the company's capital position. The firm has an $8 target price on the stock.
• BofA/Merrill upgraded its view of the semiconductor sector and upgraded Intel (NASDAQ: INTC) and Marvell Technology (NASDAQ: MRVL) to Buy from Neutral, LSI Corp. (NYSE: LSI) to Buy from Underperform, and Maxim (NASDAQ: MXIM) and National Semiconductor (NYSE: NSM) to Neutral from Underperform. The firm now sees 2010 revenue growth of 21% vs. its prior estimate of 14% due to improving electric demand and lean inventories.
• Thomas Weisel upgraded Vital Images (NASDAQ: VTAL) to Overweight from Market Weight based on compelling valuation and potential upside from its new ViTAL Enterprise product offering.
• Jones Apparel (NYSE: JNY) was upgraded to Buy from Neutral at Goldman.
• Hess Corp. (NYSE: HES) was upgraded to Overweight from Equal Weight at Barclays.
• Nationwide Health (NYSE: NHP) was upgraded to Outperform from Market Perform at Morgan Keegan.