The shares of Cleveland-based National City Corp. (NCC: sentiment, chart, options) are up more than 11% this morning after The Wall Street Journal reported that it's in talks with a number of other banks about a potential sale. The newspaper cited PNC Financial Services Group (PNC) and Bank of Nova Scotia (BNS) as potential suitors for the beleaguered bank. However, none of the parties involved have yet confirmed or denied the merger-and-acquisition rumors.

National City has been hammered this year by concerns that it will be the next financial institution to fall victim to the subprime contagion. Year-to-date, the equity is down nearly 87%. Despite the continuing panic among investors, many analysts believe the concerns have been exaggerated. Paul Miller of Friedman, Billings, Ramsey & Co. recently noted to clients, "Although a run on a bank is always a risk, we have no clear indications that a run is underway. We believe that the sell-off is overdone" for NCC shares.

While puts were the option of choice on National City yesterday -- the stock racked up a put/call ratio of 5.20 on the International Securities Exchange -- calls are taking precedence today. The security's October 3 call has traded volume of 12,692 on open interest of 31,055, while the January 2009 6 call has seen 20,639 contracts cross the tape on open interest of 185,380. At last check, NCC was trading just shy of $2.50.