PNC Financial Services (NYSE: PNC, Stock Forum) has been on fire over the past year. Since tagging a 52-week nadir of $16.20 in March 2009, the shares of PNC have more than tripled, and are now exploring the $52.75 neighborhood. Although PNC is virtually breakeven for 2010, the shares look positioned to springboard off a trendline connecting a series of higher lows. Furthermore, the equity's 100-week moving average has acted as a technical backstop since November 2009, and could help fuel PNC on its next leg higher.
In general, Wall Street analysts are in the bullish camp, with 14 of 24 analysts rating PNC a "buy" or better, according to data from Zacks. Still, that leaves plenty of room for potential upgrades. Should PNC extend its long-term trek into the black, the financial issue could lure some of these holdouts to the bullpen.
In fact, PNC kicked off the week on a high note, scoring an upbeat analyst note from Bernstein. More specifically, the brokerage firm upgraded the stock to "outperform" from "market perform," citing a “clearer road to normal [earnings per share]” in 2011, compared to its sector peers.
Bullish option bettors bombarded PNC on Monday in response, with roughly 13,000 calls change hands – almost doubling its average daily volume of about 6,600 contracts. More specifically, the equity's March 55 call saw close to 4,500 contracts cross the tape – 57% of which traded at the ask price, implying they were likely purchased. In addition, call open interest at the March 55 strike nearly doubled to 5,847 contracts overnight, confirming our theory of buyer-oriented activity.
Call traders also centered on the out-of-the-money May 55 strike, which saw about 2,200 contracts exchanged. Again, the majority of the back-month calls traded closer to the ask price, and call open interest powered higher overnight, suggesting that most of the activity consisted of fresh bullish bets.
Checking out PNC's sentiment backdrop reveals that Monday’s preference for calls over puts wasn't a single-session phenomenon. During the past two weeks, speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open more PNC calls than puts, as indicated by the security's 10-day call/put volume ratio of 1.09. What's more, this reading ranks in the 66th percentile of its annual range, implying that option players on the ISE and CBOE have initiated bullish bets over bearish at a faster pace only one-third of the time during the past year.
Further reflecting the optimism in the options pits is the security's Schaeffer's put/call open interest ratio (SOIR) of 1.00, in the eighth annual percentile. In other words, near-term speculators have had a more bullish biased toward PNC only 8% of the time during the past 52 weeks.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.