Shares of aluminum producer Alcoa Aluminum (AA) have been a strong performer in the past year, as both a play on continuing economic growth and as a hedge against inflation. One trader sees that trend continuing for the foreseeable future.
That’s based on the January 2023 $55 calls. With 409 days until expiration, over 11,960 contracts traded, a 48-fold jump in volume from the prior open interest of 248 contracts. The buyer of the calls paid $6.88 to make the trade.
With shares currently around $44, the $55 option would move in-the-money on a 25 percent move higher in shares in the next 13 months. That would still leave shares a bit off their 52-week high of $57.
In addition to shares nearly tripling in the past year, a rebound in earnings has left the stock trading at 7 times forward earnings, an attractive value here for the commodity producer.
Action to take: Investors may like shares here for further upside. However, shares aren’t paying a dividend at the moment.
The call options look particularly attractive, given the likely economic uptrend in the next year after the latest market fears start to wane. Traders may want to build a position in these call options by buying a partial position now, and more contracts on any further drops in the market.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.