Bulls: Bet on this Aluminum Stock's Rally

Optimism surrounding to metal producer could carry over into 2025

Dec 6, 2024 at 3:45 PM

HIMS

Subscribers to Schaeffer's Weekend Trader options recommendation service received this AA commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Alcoa Corp (NYSE:AA) stock recently pulled back to its 10-day moving average as well as its May highs, after conquering the weekly $42.50-$45 level. This clears the way for the equity to run toward the $57.50 region, making now a great time to initiate a long position.

AA Chart December 062024

The security has received multiple upgrades of late, with eight of 10 analysts in coverage now sporting a "buy" or better rating. This optimism may extend into 2025 with a more favorable environment for the steel company, which would create additional tailwinds. Plus, a buildup of put open interest (OI) at the 45-strike could become supportive going forward.

Premiums are currently affordable, per Alcoa stock's Schaeffer's Volatility Index (SVI) reading of 42%, which sits higher than just 2% of reading from the last 12 months. This suggests options traders are pricing in extremely low volatility expectations. It's also worth noting that the stock's Schaeffer's Volatility Scorecard (SVS) of 73 out of 100 implies a tendency to outperform volatility expectations -- a boon for premium players.

Our recommended February call has a leverage ratio of 5.5, and will double on a 19.4% rise in the underlying security.

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