Buy Calls on Alcoa

BUY CALLS ON ALCOA
By www.Options-Trading-Education.com


Although lower second quarter
earnings drove Alcoa’s stock price
lower news of a new contract with
Airbus may be good reason to by
calls on Alcoa.


Aluminum prices are at historic
lows which is what drove down
aluminum profits for the
company in the second quarter of
this year.


HOWEVER,
ITS PRESENCE IN AEROSPACE IS
SUBSTANTIAL AND GROWING.


A recent press release tells us
that Alcoa (AA) has just finalized
agreements worth $1.4 Billion
with the European airplane
maker, Airbus, to supply a wide
range of products for virtually all
of Airbus’ products.


That includes the newest, the
A350.

Highlights of this contract are the
aluminum and aluminum-
lithium parts for wings and
fuselage panels.


These parts are meant to
compete with the carbon fiber
reinforced plastic parts used by
Boeing in its 787 Dreamliner.


The company has developed state
of the art processes to make
aluminum-lithium parts giving it
a technical edge over many other
aluminum makers and giving
traders a reason to buy calls on
Alcoa before the rest of the
market catches on.


Overall Alcoa gets three and a
half billion in revenue yearly
from its aerospace customers
with products including
aluminum, lithium, titanium,
and nickel.


Although many are tempted to
buy puts on airline stocks there
are lots of planes in the pipeline
and lots of profits for efficient
suppliers, which may be a good
reason to buy calls on Alcoa.


Where Will Alcoa’s
Profits Be?


In an increasingly competitive
world the most successful
companies are commonly the
most innovative.


When Alcoa found out that
Boeing intended to use carbon
fiber reinforced plastics on its
Dreamliner the company looked
for an alternative that it could
make.


It had to be competitive in being
stronger, lighter, corrosion
resistant, and cheaper.


The technology they developed was
aluminum-lithium. According to
Alcoa, using aluminum-lithium
instead of composites will improve
fuel efficiency by a forth, reduce
weight by as much as a tenth, and
result in a product that requires
roughly half as many inspections
over time for structural problems
and corrosion issues.


As with the use of composites
aluminum-lithium results in an
airplane with better humidity
control and larger windows.


In the world today there are over
eight thousand commercial
aircraft on order. This amounts
to eight years of aircraft
production.


These would also appear to be
good reasons to buy calls on
Alcoa.


Today’s leading aircraft makers
are Boeing and Airbus.

However, Embraer in
Brazil, Comac in China, and
Russian manufacturers all are on
the rise.


Given time these companies will
cut out niches in the global
market and use advanced
technologies such as Alcoa’s
aluminum-lithium parts to make
lighter, stronger, more cost
efficient aircraft.


Succeeding in options trading
often has to do with seeing the
future and then timing the
purchase or sale of an options
contract.

USING OPTIONS TO GET A
GOOD PRICE


Despite what could be a rosy
future for Alcoa in making parts
for the automotive and aerospace
industries the stock is down
today due to low aluminum
prices.


Options traders can buy calls on
Alcoa simply to make a short
term profit.


However, long term investors can
also buy calls on Alcoa in order to
buy the stock at a depressed price
prior to a global economic
recovery and more profits for
Alcoa.


Risk management in option
trading allows investors to stake
out positions very cost effectively
and not buy until the stock goes
up.

For more insights and useful
information regarding options
and options trading, visit:

www.Options-Trading-Education.com.

Buy Calls on Alcoa

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