Prudential Financial (PRU) 11/6/09 PriceWatch Alert Targets 10.98% Downside Protection

Posted: Friday, November 06, 2009 8:37 AM EDT

Prudential Financial (NYSE: PRU) closed yesterday at $44.64. 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 41.75 and resistance in the 47.95 range. Technical indicators for the stock are Bearish 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 43 covered call (PWQ AC) for a net debit in the $39.74 area. That is also the break even stock price for this trade. This covered call has a 71 day duration, provides 10.98% downside protection and an 8.20% assigned return rate for a 42.17% 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 43 call (PWQ AC) for a $25.05 debit. The trade has a 71 day life and would provide 10.28% downside protection and an 11.78% assigned return rate for a 61.00% annualized return rate (for comparison purposes only). Prudential Financial has a current annual dividend yield of 1.23%. [FBB-Seven Summits Research]

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