Bleak Forecast Dents Aluminum Stock

BMO slashed AA's price target to $55 earlier

Digital Content Manager
Jan 19, 2023 at 10:16 AM
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Alcoa Corp (NYSE: AA) is out of the earnings confessional, where the aluminum name reported slimmer-than-expected fourth-quarter losses, as well as a revenue beat. This marked the company's second-straight quarterly loss, however, which was made worse by the fact Alcoa expects a 0.5 million metric ton decrease in alumina shipments for 2023 compared to a year earlier, amid lower bauxite quality at Australian refineries and San Ciprián refinery's partial curtailment. 

Last seen down 2.3% to trade at $52.15, the stock also drew a price-target cut from BMO to $50 from $55. The shares' now 14% year-to-date gain yesterday fell short of the $58 region, which acted as resistance in August as well. Longer term, AA is down 28% in the last nine months and is a far cry from its March 25 all-time high of $98.09.

Options traders are playing the post-report drop with 8,614 calls and 6,077 puts crossing the tape at last check, volume that's six times the volume that's typically seen at this point. The most popular contract is the March 60 call, followed by the January 2023 55-strike call.

These traders are in luck, as AA options are affordably priced at the moment. This is per Alcoa stock's Schaeffer's Volatility Index (SVI) of 57% that ranks higher than just 8% of readings from the last year. In simpler terms, options traders are pricing in low volatility expectations.  


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