High Hopes Abound Ahead of Alcoa Inc (AA) Earnings

Alcoa Inc (AA) call options have been popular, leading into the company's earnings report

by Alex Eppstein

Published on Oct 10, 2016 at 12:16 PM

The unofficial start to earnings season is just around the corner, with aluminum giant Alcoa Inc (NYSE:AA) slated to report tomorrow morning. Below, we'll take a closer look at the stock's past performances following earnings, and what the options market is expecting this time around.

Diving right in, AA stock has historically struggled in the aftermath of earnings. Specifically, the shares have ended the session adjacent to the quarterly event lower six of the last eight times. On the bright side, following July's report, the stock soared 5.4%. This time around, the options market is pricing in an even bigger swing of 7.2%, in either direction.

If options traders have their druthers, AA will break to the upside after earnings. According to data at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open more than three times as many calls as puts during the past two weeks. What's more, the resultant call/put volume ratio of 3.42 ranks only 6 percentage points from an annual peak.

Underscoring this call focus is Alcoa stock's Schaeffer's put/call open interest ratio (SOIR). At 0.35, this SOIR indicates calls nearly triple puts among options expiring in the next three months. Not to mention, the ratio registers in the low 18th percentile of its annual range.

On the charts, Alcoa Inc (NYSE:AA) is up 0.2% today at $31.44, and is a solid 6.2% higher on a year-to-date basis. That said, the shares are quickly approaching the $32-$34 area, which has rejected the stock several times in 2016. In the best-case scenario for option bulls, AA will gap above this troublesome zone tomorrow, and make a run at its annual high of $34.50, notched in late April.

Let us help you profit from market volatility. Target big gains in short order with a 30-day trial of Schaeffer's Weekly Volatility Trader!

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
Tiffany Stock Drops as Takeover Talks Dissipate
LVMH was to acquire Tiffany & Co in a billion-dollar deal
Coty Stock Glows Up with Possible Kardashian Cosmetics Line
The trendy cosmetics company is in talks with reality TV star Kim Kardashian West over a line of beauty products
The Big Bankruptcy You Should Be Afraid Of
Porter Stansberry is making a concerning prediction.