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Bulls and bears crowd McGraw Hill

Barbarians are at McGraw Hill's gate, along with bulls and bears.

The diversified publishing company, which sells schoolbooks and rates trillions of dollars in debt, popped yesterday after Ontario Teachers' Pension Fund and Jana Partners said they might push management to sell assets or reshuffle operations. At one point the stock rallied to $45.47, its highest price since the 2008 market crash, before ending the session up 7.29 percent at $44.43.

The first option trade that crossed our monitors was bearish as 3,000 September 37 puts were bought for $0.25 and an equal number of September 41 calls were sold for $2.85, resulting in a credit of $2.60. The transaction is the equivalent of selling MHP shares $43.60, with a minimum price of $39.60 thanks to the puts.

Sentiment brightened three hours later, when 2,000 November 44 calls were bought for $3.35 and 2,000 November 47s were sold for 1.80. That trade cost $1.55 and will earn 94 percent if MHP closes at or above $47 on expiration.

MHP's last earnings report on July 28 beat forecasts and management issued bullish guidance. Its biggest moneymaker is Standard & Poor's, which rates bonds but also owns the widely followed stock indexes. Many critics thought the company would be doomed after the 2008 debt crisis, but it's maintained market position because its ratings are intertwined with regulatory schema and there is no punishment for being wrong.

Overall options volume in MHP was 22 times greater than average yesterday.

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

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

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