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TheStreet Open House

How the Bulls Are Playing McGraw Hill

By David Russell of OptionMonster
 
NEW YORK -- McGraw Hill Financial (MHFI) has been trending steadily higher, and the bulls are expect more gains in 2014.
 
OptionMonster's scanning programs detected the purchase of 6,500 May 77.50 calls, most of which priced for $3.65. There was no previous open interest at the strike before the trade appeared, so new money was being put to work on the long side.
 
These calls lock in the price where shares can be bought, allowing investors to position for a rally with limited risk. They now stand to earn potentially huge leverage if the stock continues to make new all-time highs.
 
McGraw Hill Financial's shares rose 2.95% to $76 Friday, their best closing price ever. The parent of Standard & Poor's has spent the last month breaking above its old peaks from 2007 and bounced at its 50-day moving average last Monday. That could make some chart-watchers think that it will continue to advance.
 
While  S&P is known for credit ratings, it also also collects royalties on the countless funds benchmarked to its equity indexes. That means it is can benefit greatly from market rallies.
 
Total option volume was 43 times greater than average in the session, with calls outnumbering puts by a bullish 49-to-1 ratio.
 
Russell has no positions in MHFI.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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