Liz Claiborne (NYSE:LIZ) is reinventing itself, and unlike most makeovers, the changes seem to be paying off. At the beginning of the year, LIZ announced it would be shifting its overall brand name to Fifth and Pacific (the imaginary intersection where, according to the company’s website, “California cool meets New York chic”). The name change and a new ticker, FNP, will be finalized in mid-May.

With this move, LIZ hopes to focus on its luxury brands: Kate Spade, Juicy Couture and Lucky. The apparel maker ditched its namesake brand along with the Monet brand, selling it to J.C. Penney (NYSE:JCP), while the Dana Buchman brand was unloaded to Kohl’s (NYSE:KSS).

Standard & Poor’s rewarded LIZ for these asset sales, upping its rating on the company’s debt one notch from B-minus to B (still in “junk” territory, but less so) and noting a “stable” outlook. This follows an upgrade from Moody’s in December, which also approved of LIZ selling off some of its assets.

Last week, the company reported fourth-quarter earnings of 10 cents per share (excluding items), matching estimates but falling four cents from the previous year’s per-share results. Sales, however, were up 12% excluding dismissed or licensed brands. Lucky Brand sales rose 23%, and Kate Spade sales surged 73% during the reporting period, helping to offset a 15% drop in Juicy Couture sales.

LIZ has rallied roughly 35% in 2012, hitting a new 52-week high in yesterday’s session. The stock is now solidly in double-digit territory for the first time since the fall of 2008 (though it is pulling back along with the broader market on Tuesday morning). And institutional option traders are expecting continued upside in the shares.

On Monday, option volume was 19 times the average, with more than 40,000 options trading versus the typical 2,100. Roughly two-thirds of this activity was on the call side, including 13,250 calls that traded off the ask side at the in-the-money April 9 strike for $2.80 per contract.

Also notable were 13,274 contracts trading at the July 13 call, nearly all of which translated as new open interest. These out-of-the-money options, which have a little more time until expiration, closed at an ask price of $1.05 per contract.

When call options are bought, they have unlimited upside potential if the underlying stock rallies. The April 9 call currently has a delta of 91, while the July 13 call’s delta is 42. This means the calls will increase, respectively, by 91 cents and 42 cents for every $1 advance in LIZ shares.

The most a call option can lose, no matter how much the underlying stock might decline, is 100% of the premium paid. Breakeven for a call (at options expiration) is the strike price plus the premium. So in the example of the April 9 calls bought for $2.80, LIZ would need to be trading above $11.80 at expiration in order for the options to be profitable.

Another active strike was the July 11 put, which saw a block of 13,250 shares trade at $1.20. This was the bid price at the time, suggesting the options were sold to open. The trade may have been paired with the July 13 call as part of a so-called “synthetic long stock,” but suffice to say that put selling is also a bullish strategy and calls for the stock to stay above the $11 level through July expiration.

And this wasn’t the first time LIZ has seen bullish options activity rear its head recently. In mid-February, ahead of the earnings report, LIZ saw “a spate of call buying,” mostly at the July 11 and 13 strikes. Sound familiar? It’s possible that these same option buyers were back to enhance their positions following the (guarded) vote of (muted) confidence from S&P.

As of this writing, Beth Gaston Moon does not own any shares mentioned here.