How bulls are playing McGraw Hill

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The bulls want to have their cake and eat it too in McGraw Hill Financial.

optionMONSTER's Heat Seeker tracking program detected a flurry of call volume in the company, whose businesses include Standard & Poor's Ratings Services, Platts, and J.D. Power & Associates. Almost all the activity focused on the November 50 calls and the November 65s.

Roughly 5,800 contracts changed hands in each at the same time, with the 50s sold for $15.35 and the 65s bought for $2.70. Volume was below open interest at the lower strike, which suggests that an existing position was closed and rolled higher.

Calls lock in the price where shares can be purchased, letting bullish positions be placed cheaply and with limited risk. That seems to be exactly what yesterday's investor did. The trader probably earned huge profits in the 50s when the stock climbed, and now he or she is adjusting it to the higher strike.

The investor collected $12.65 in the process and can benefit from further gains. (See our Education section for more on how options can be used to manage trades more effectively.)

MHFI fell 0.5 percent to $65.59 yesterday. The stock is up 25 percent in the last six months and stands near its peaks at the height of the credit bubble in 2007.

Overall option volume was 43 times greater than average in the session. Calls accounted for a bullish 97 percent of the total.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: MHFI

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