Alcoa Options Busy
Today’s tickers: AA, KEY, EWZ, F, CBS, TCK & OSK AA – The aluminum producer has experienced a more than 7.5% rally in shares today to $12.66. Commodity stocks rose on reports indicating manufacturing has declined less than previously forecast, in addition to an unexpected increase in spending on construction. Options activity on Alcoa suggests near-term bullish sentiment and medium-term bearishness. Bullish traders targeted the August 13 strike price to buy more than 5,700 calls for 36 cents apiece. Meanwhile, one investor rolled 2,000 call options up from the August 12 strike price by selling the lots for 83 cents, which he then spread against the purchase of 2,000 calls at the higher August 14 strike for 14 cents a-pop. A much gloomier tale was inferred from the actions of bearish individuals in the October contract. The now in-the-money October 12.5 strike has approximately 12,900 calls shed for 1.15 apiece. We note that the call sales could represent the work of investors banking gains due to the existing open interest at the strike of 71,000. However, a similar picture was seen at the October 15 strike where approximately 25,000 calls were sold for 48 cents per contract. The October 15 strike previously had open interest of just 6,900 contracts compared to the more than 30,900 lots which exchanged hands there today. Perhaps call sellers do not see shares of Alcoa rising through $15.00 by expiration. Otherwise, investors could be long shares of the underlying and establishing pseudo-covered calls by shedding the contracts at the higher strike. Finally, the January 2011 5.0 strike price had 18,500 puts trade for 40 cents apiece. We believe it is likely that the investor is closing out a short put position originally established back on May 8, 2009. It appears that the trader sold 18,000 puts for 83 cents and today bought the lots back for 40 cents apiece. If this is indeed the direction of the trade, the investor has banked profits of 43 cents per contract, or a total of $774,000. – Alcoa, Inc. KEY – Shares of the banking services firm have rallied nearly 11.5% higher during today’s trading session to stand at the current price of $6.44. One long-term options bull was observed initiating a call spread in the January 2010 contract. It appears that the investor purchased 4,000 now in-the-money calls at the January 6.0 strike price for an average premium of 1.19 apiece,…
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