IB Options Brief: Alcoa, Inc. (AA) & Moody’s Corp. (MCO)
AA – Alcoa, Inc. – All eyes will be on aluminum producer, Alcoa, Inc., on Tuesday when the company reports third-quarter earnings after the closing bell. Shares in the name are bucking the trend on a down day for the broader market, trading up 0.80% to stand at $9.16 as of 11:50 a.m. in New York.
Options volume is heavier than usual leading up to tomorrow’s earnings release, with upwards of 40,000 contracts in play so far versus the stock’s average daily options volume of roughly 30,300 contracts. Call options are slightly more active than puts just before midday, due in part to trading traffic in the Nov. $10 strike call.
Traders exchanged nearly 9,000 calls at the Nov. $10 strike this morning against open interest of 1,542 contracts. It looks like most of the call options were purchased for an average premium of $0.13 apiece, thus positioning buyers to profit in the event of a near 11% rally in the price of the underlying to exceed $10.13 by November expiration. Shares in Alcoa last traded above $10.13 back in April.
MCO – Moody’s Corp. – A burst of put buying on ratings agency, Moody’s Corp., pushed the stock onto our ‘hot by options volume’ market scanner this morning. Shares in the name are currently down 0.90% to stand at $44.51 as of 12:00 p.m. ET. One or more options strategists appear to be betting on further declines in the price of the underlying in the near term.
Put buyers may be securing downside protection to hedge long stock in the name, or could be establishing outright bearish positions on Moody’s ahead of the company’s third-quarter earnings report on October 26th. Traders focused in on the Nov. $44 strike put, trading 5,000 of the contracts this morning against previously existing open interest of 18 contracts.
Most of the puts appear to have been purchased for an average premium of $1.55 apiece. The bearish options make money if shares in Moody’s Corp. slip 4.6% to breach the average breakeven point on the downside at $42.45 by expiration next month.
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