McGraw Hill Financial, Inc (MHFI) is a company that provides credit ratings and analytics for global commodity and capital markets. The company’s stock is currently trading around $73.70 in a 52 week range of $42.07-$74.37. Shares of MHFI have been performing very well this year with shares adding nearly 35% year to date. Bullish options activity in MHFI this morning shows that options traders believe there is more upside in store for MHFI. Earlier today a trader sold 2,600 MHFI Dec 70 puts for $0.45. This block represents volume that is 3.3 times the average daily option volume in MHFI. The large amount of risk that this trader is taking on indicates the relatively high level of bullish conviction that this trader has. The stock is trading very well on a chart as well. Just off of its 52 week high MHFI is trading well above the Ichimoku Cloud with the future cloud sloping out and up. A strongly upward sloping future cloud indicates the stock may have more room to the upside. With strong technical and bullish order flows we believe MHFI is setting up well here for a covered call trade.
Trade: Buy 100 shares of MHFI stock at $73.70 for every Dec 70 Call Sold for $4.10
Reward: $40 per 1 lot
Breakeven: $69.60
If shares of MHFI close above $70.00 on December expiration this trade will net its maximum potential return of $40 per 1 lot. This trade is also profitable anywhere above $69.60. Should the stock close above $70.00 on expiration this trade will net an annualized return of 7.3%.
