Traders Buy Prudential Calls

By Pete Najarian, co-founder of OptionMonster

Prudential Financial (PRU Quote) drew upside options activity Monday after Moody's upgraded its credit outlook on Prudential at the end of last week.

Traders were focused on the July 50 options, in which 8,540 calls changed hands at nearly 10 times the open interest, according to OptionMonster's tracking systems. Most of the calls, which have an average volume of just 98 a day at that strike, were bought for 5 cents.

Prudential also saw some interest in the July 42 calls, many of which were actively bought for 40 cents. These are both well out of the money, as Prudential closed Monday up 2.8% to $37.78, so traders are apparently hoping for a significant move higher in the next three weeks until the July options expire.

The insurance and investment company has been on a wild ride, trading between $60 and $80 a year ago and plummeting to near $10 in November 2008 and again in March 2009. But recovery has been swift since then, climbing past $43 in May and then in early June until slipping recently back into the $30s.

On Friday, Moody's affirmed Prudential's debt rating and upgraded its outlook for the company, which has raised $1.4 billion in common equity and $1 billion in senior debt to help stabilize its credit. Prudential plans to release quarterly earnings on Aug. 5.