Call Buying Peaks as Panera Stock Hits Record Highs

While most of Wall Street's attention during the "Trump rally" has focused on the financial and materials sectors, one restaurant stock has been posting monster gains: Panera Bread. PNRA stock has rallied an amazing 37.2% since Nov. 8 to trade at $258.22, and earlier hit a record high of $260.24, possibly enjoying a halo lift from Darden Restaurants stock. Amid this blistering price action, options traders have been betting on higher highs for PNRA shares, based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Call Traders Eye $260, $265 Levels for PNRA Stock

Specifically, Panera has a 10-day call/put volume ratio of 4.94 across these exchanges. Not only does this mean nearly five call options have been purchased for every put during the past two weeks, but it stands at an annual high. In other words, PNRA options traders have been unusually bullish in recent weeks. 

Digging deeper, the April 260 call saw the biggest increase in open interest during this time frame, with 1,252 contracts added. Data from the major exchanges confirms the bulk of the activity at this strike was of the buy-to-open variety, meaning traders were betting on PNRA stock toppling the round $260 level in the coming weeks -- a feat that just came to fruition. 

This trend is continuing today, with PNRA calls trading at seven times the expected pace. The April 260 call is again popular, standing as the most traded option so far, while buy-to-open activity seems to be taking place at the April 265 call. These traders are striking at an opportune time, based on the stock's Schaeffer's Volatility Index (SVI) of 19%. This reading sits in the low 14th annual percentile, suggesting low volatility expectations are currently priced into short-term options. 

PNRA Short Sellers Persist

Despite this bullish bias in the options pits, apparently not everyone is sold on Panera stock. For instance, short interest has continued to rise in recent weeks, and now represents almost 15% of the equity's total float. Based on PNRA's average daily volume, it would take more than six sessions for these bears to cover their positions. Moreover, some of the recent call buying could be the work of short sellers using options to hedge against more gains from the shares. 

PNRA Shares Well Into Overbought Territory

On a general basis, oversold stocks just surpassed the number of overbought stocks on Wall Street. PNRA stock is an outlier, though. Panera Bread now boasts a 14-day Relative Strength Index (RSI) above 84, with any reading above 70 considered overbought. As such, PNRA shares are theoretically due for a short-term pullback.

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