Maximize Your Alcoa Investments: A Covered Call Strategy

Exploring Additional Income With Alcoa’s Covered Call Options

Shareholders of Alcoa Corporation (Symbol: AA) can enhance their income beyond the current stock’s 1.1% annualized dividend yield by selling January 2027 covered call options at the $60 strike price. This move could generate a premium based on the $4.30 bid, resulting in an annualized return of 5.5% based on the current stock price. If the stock is not called away, this strategy could yield a total annualized return of 6.6%. However, if the stock price exceeds $60, shareholders would lose out on any gains beyond this threshold. Notably, AA shares would need to increase by 57.4% for that scenario to materialize, translating to a 68.7% return for shareholders, alongside any earned dividends before the stock is called.

Understanding Dividends Through Alcoa’s History

Dividends fluctuate and often depend on a company’s profitability. The dividend history chart for AA, displayed below, can provide insight into whether the latest dividend will be sustained, helping investors gauge the reliability of the 1.1% annualized dividend yield.

Analyzing Alcoa’s Trading Patterns

The chart also depicts AA’s trailing twelve-month trading history, with the $60 strike indicated in red:

Investors can use this chart in conjunction with historical volatility to assess if selling a covered call option at the $60 strike offers a reasonable risk-reward balance. Currently, the trailing twelve-month volatility for Alcoa, calculated using the last 251 trading days along with today’s price of $38.00, stands at 48%. For more details on various call options contracts, visit the AA Stock Options page on StockOptionsChannel.com.

Current Market Trends in Options Trading

During mid-afternoon trading on Tuesday, put volume among S&P 500 components reached 479,532 contracts, while call volume peaked at 1.08 million. This results in a put:call ratio of 0.45 for the day. Compared to the long-term median put:call ratio of 0.65, it indicates a preference for calls over puts among traders currently active in options trading.

For insights into the 15 options that traders are currently discussing, explore further resources.

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Also see:

• Institutional Holders of NOVV
• Funds Holding BH
• Funds Holding GOCT

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