Traders betting on comeback in Alcoa
Alcoa has plunged in recent weeks, but traders are looking for a rebound.
optionMONSTER's Heat Seeker system shows that 20,000 February 6.50 calls were bought for $0.66 and, in a separate trade, 10,000 July 7 calls were purchased for $1.14 to $1.16 today. Volume was far above open interest in both strikes, indicating that these are new positions.
Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction. (See our Coaching section)
AA is up 7.93 percent to $7.49 in afternoon trading but has fallen 29 percent in the last month. The aluminum producer's released mixed results on Jan. 11 and is scheduled to report earnings next on April 11.
Overall option volume is about average in AA today, but calls outnumber puts by a bullish 20-to-1 ratio.
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