Alcoa Options Trading Offers Profit Opportunities for Investors

Investors in Alcoa Corporation (Symbol: AA) are seeing new options trading commence, specifically for June 13th expiration. Using our YieldBoost formula, significant put and call contracts have been identified in the AA options chain.

Put Contract Analysis

The put contract at the $23.00 strike price is currently trading at a bid of 15 cents. If an investor sells-to-open this put contract, they would agree to purchase shares of AA at $23.00, while also collecting the premium. This sets the effective cost basis for the shares at $22.85 (excluding broker commissions). For those considering a purchase of AA shares, this could provide an appealing option compared to the current market price of $24.75 per share.

This $23.00 strike represents a roughly 7% discount from the current trading price, indicating that it is out-of-the-money by that percentage. Current data suggests that there is a 66% chance the put contract may expire worthless. Over time, we will monitor these odds to observe any changes, publishing a chart of these metrics on our website. If the contract does expire worthless, the premium collected would yield a 0.65% return on the investment, equating to an annualized rate of 5.54%, which we term YieldBoost.

Charting Alcoa’s Trading History

Below is a chart showing Alcoa Corporation’s trailing twelve months of trading history, with a highlight on where the $23.00 strike price lands:

Call Contract Insights

Shifting to the call side, the contract at the $26.00 strike price has a current bid of 17 cents. If investors purchase AA at $24.75 per share and sell-to-open this call contract as a covered call, they would be agreeing to sell their shares at $26.00. After accounting for the collected premium, this approach could yield a total return of 5.74% if the stock gets called away upon expiration on June 13th (excluding broker commissions).

Investors need to consider that if AA shares increase significantly in value, potential upside may be lost. Therefore, reviewing Alcoa’s recent trading history and business fundamentals is essential. Below is a chart that illustrates AA’s trading history with the $26.00 strike highlighted:

The $26.00 strike is approximately a 5% premium to the current trading price, indicating it is out-of-the-money by that margin. There is also a possibility that this covered call contract could expire without being exercised, allowing investors to keep both their shares and the collected premium. Current analytics suggest a 55% chance of this occurrence. If the covered call expires worthless, the premium would boost investor returns by 0.69%, translating to an annualized return of 5.83%.

Volatility Overview

The implied volatility for the put contract is 75%, while the call contract reflects an implied volatility of 61%. Meanwhile, the actual trailing twelve-month volatility, based on the last 250 trading days and the current price of $24.75, is calculated at 52%. For further ideas on put and call options contracts, visit StockOptionsChannel.com.

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Additional Resources:

• NNI YTD Return
• SKYW Historical Earnings
• PRLE Insider Buying

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