Options Players Rush National City Corporation (NCC) on Buyout News
Only hours after PNC Financial Services Group Inc.‘s
PowerRating) received approval for a $7.7 billion cash injection as part of the government’s $750 billion bailout, the company announced that it would purchase National City Corporation
PowerRating) for $5.58 billion. Meanwhile, National City shareholders will receive 0.0392 shares of PNC common stock for each share of NCC. The deal – which values NCC at about $2.23 per share, a discount of 18.9% from yesterday’s closing price of $2.75 – is expected to close by the end of the year.
As alluded to above, options players have responded to the news in droves. On the bulls’ side, NCC’s November 3 call is the most active, with more than 9,100 contracts crossing the tape. Also notable is its January 2.50 call, with roughly 8,700 contracts changing hands. Meanwhile, the financial firm’s January 6 call has seen volume of about 5,900 contracts so far today.
On the bears’ side, NCC’s January 5 put has been the most popular today, with about 5,700 contracts changing hands. In addition, the security’s November 5 and January 4 puts have each seen volume of more than 5,200 contracts, while roughly 4,700 November 3 puts have crossed the tape so far today.
Prior to the news, options players were fleeing to the bullpen. During the past 10 days on the International Securities Exchange (ISE), NCC saw more than 15 calls bought to open for every put, as options traders purchased bullish bets at a faster pace than ever. In addition, the stock’s Schaeffer’s put/call open interest ratio (SOIR) recently reached an annual optimistic peak of 0.27, indicating that calls virtually quadruple their put counterparts among options slated to expire within 3 months.
At last check, the shares of NCC were down 66 cents, or 24%, trading at $2.09. Meanwhile, while the Dow Jones Industrial Average (DJIA) has logged a 340-point loss, the shares of PNC have rebounded off their 150-month moving average, adding $1.50, or 2.67%, to dawdle near the $58.40 level.
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Copyright Schaeffer’s Investment Research. www.schaeffersresearch.com.