Prudential Financial (PRU) Shows Neutral Technicals But Gets 4 Star Buy Rating From S&P

Posted: Monday, November 23, 2009 9:09 AM EDT

Prudential Financial (NYSE: PRU) closed yesterday at $47.67. So far the stock has hit a 52-week low of $10.63 and 52-week high of $55.99. Prudential Financial stock has been showing support around 46.94 and resistance in the 48.68 range. Technical indicators for the stock are Neutral and S&P gives PRU a positive 4 STAR (out of 5) buy rating. PRU appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 46 covered call (PWQ AV) for a net debit in the $43.17 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 9.44% downside protection and a 6.56% assigned return rate for a 44.31% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the PRU Jan '11 15 Call (OYK AC) and selling the Jan '10 46 call (PWQ AV) for a $29.20 debit. The trade has a 54 day life and would provide 7.28% downside protection and a 6.16% assigned return rate for a 42.00% annualized return rate (for comparison purposes only). Prudential Financial has a current annual dividend yield of 1.15%. [ABR-Seven Summits Research]

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