Alcoa (AA) kicked off earnings season with a sour note indicating they are experiencing slowing demand and a drop in the price for aluminum. Alcoa indicated a large part of the slowing demand is coming from the automotive and housing construction market segments.
Alcoa has been the big dog in the aluminum market for some time, but faces increasing pressure from foreign aluminum manufacturers. Russian companies Rusal and Saul Group are merging to form a new company of comparable size to Alcoa.
The price of commodities, especially aluminum, has experienced significant increases in the last year. With aluminum prices softening, a prudent stock options strategy might be a bear call credit spreads for aluminum manufacturers.
Using PowerOptions stock options search tool SmartSearchXL, the following bear call credit spreads positions for aluminum manufacturing stocks were found on October 11, 2006 with all stock options expiring on November 17, 2006 (November stock options expiration day):
| SmartSearchXL bear call search on October 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price 10/9/06 |
Sell Option |
Expire &Strike |
Bid | Buy Option |
Expire &Strike |
Ask | %Return | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AL | 39.72 (-0.95) | ALKI | 06 NOV 45.0 (38) | 0.35 | ALKJ | 06 NOV 50.0 (38) | 0.15 | 4.20 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CENX | 32.52 (-1.02) | CQLKG | 06 NOV 35.0 (38) | 1.25 | CQLKH | 06 NOV 40.0 (38) | 0.40 | 20.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Analysis
Two bear call credit spreads stock options positions of Alcoa’s competitors Alcan (AL) and Century Aluminum (CENX) were returned with potential returns in 38 days of 4.2% and 20.5% respectively.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the aluminum bear call credit spreads investment strategy.
PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a bear call credit spreads investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing bear call credit spreads stock options positions.
[tags]bear call credit spreads, stock options, option income, investment strategy, Alcoa, Century Aluminum[/tags]