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What's behind call action in McGraw-Hill

As McGraw-Hill muscles its way to a new multi-year high today, and one investor is adjusting a position to eke out more profits.

optionMONSTER's tracking systems detected the sale of 2,000 August 42 calls for $1.27. An equal number of May 40 calls were purchased at the same time for $1.44, though volume was below open interest in that contract.

The trade was probably the work of an investor who owns shares in the publishing company and had previously sold the May calls as part of a covered call strategy. The trader was apparently rolling that position to the higher strike, which would capture an additional $2 of upside on the stock.

In return for that potential gain, the investor paid a net $0.17 and agreed to hold the shares for an additional three months. (See our Education section)

MHP rose 0.35 percent to $40.19 in afternoon trading. It spent more than four months grinding against resistance around the $39 level but yesterday pushed above $40 for the first time since September 2008.

The company's last earnings report on Feb. 1 beat estimates, but the stock fell after management sounded a cautious tone on textbook sales. However, investors seem to be focusing instead on recovery at its Standard & Poor's division, which is benefiting from better conditions in the financial markets.

The call roll pushed total option volume in MHP to more than 40 times average so far today.

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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