Call Buyers Jump on Panera Bread (PNRA)

03/08/2010 10:26 am EST

Focus: OPTIONS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Calls were the options of choice on Friday for Panera Bread Company (PNRA), with bullishly oriented option activity spiking to eight times the usual level. So far, nearly 5,900 call contracts have changed hands, easily outpacing PNRA's expected daily call volume of fewer than 700 contracts.

PNRA price chartTraders honed in on PNRA's out-of-the-money March 80 call, with more than 4,000 contracts crossing the tape at this strike. About 74% of these calls have traded at the ask price, revealing a bias toward buying activity, and implied volatility is up 1.8% at last check. There are currently just 490 contracts in residence at the March 80 call, suggesting that the bulk of today's volume consists of freshly opened positions.

Today's bullishly skewed speculation is a drastic change of pace for PNRA. The stock's Schaeffer's put/call open interest ratio (SOIR) stands at 1.76, in the heavily pessimistic 98th annual percentile. Plus, the equity has garnered a ten-day International Securities Exchange (ISE) put/call volume ratio of 7.46, in the 99th annual percentile, revealing that bearish bets have been in unusually high demand lately.

However, with 9.5% of PNRA's float sold short, we could be seeing a scramble to hedge by short sellers—not unlike the situation with STEC, Inc. (STEC) cited earlier. The stock is up more than 4% at last check, and earlier tagged a new 52-week high of $77.97. Now that the shares have vaulted above short-term pressure in the $75 region, this level could switch roles to act as support going forward.

By Elizabeth Harrow, contributor, Schaeffer’s Trading Floor Blog

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