Buy Calls on Alcoa

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Buy Calls on Alcoa

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.

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Buy Calls on Alcoa

  1. 1. Buy Calls on Alcoa Bywww.Options-Trading-Education.com
  2. 2. 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. www.Options-Trading-Education.com
  3. 3. Aluminum prices are at historic lows which is what drove down aluminum profitsfor the company in the second quarter of this year. www.Options-Trading-Education.com
  4. 4. However, its presence inaerospace is substantial and growing. www.Options-Trading-Education.com
  5. 5. A recent press release tells usthat Alcoa (AA) has just finalized agreements worth $1.4 Billion with the European airplane maker, Airbus, to supply a widerange of products for virtually all of Airbus’ products. www.Options-Trading-Education.com
  6. 6. That includes the newest, the A350. www.Options-Trading-Education.com
  7. 7. Highlights of this contract arethe aluminum and aluminum- lithium parts for wings and fuselage panels. www.Options-Trading-Education.com
  8. 8. These parts are meant tocompete with the carbon fiber reinforced plastic parts used by Boeing in its 787 Dreamliner. www.Options-Trading-Education.com
  9. 9. 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 tobuy calls on Alcoa before the rest of the market catches on. www.Options-Trading-Education.com
  10. 10. Overall Alcoa gets three and a half billion in revenue yearlyfrom its aerospace customers with products including aluminum, lithium, titanium, and nickel. www.Options-Trading-Education.com
  11. 11. Although many are tempted to buy puts on airline stocksthere are lots of planes in thepipeline and lots of profits forefficient suppliers, which maybe a good reason to buy calls on Alcoa. www.Options-Trading-Education.com
  12. 12. Where Will Alcoa’s Profits Be?www.Options-Trading-Education.com
  13. 13. In an increasingly competitive world the most successfulcompanies are commonly the most innovative. www.Options-Trading-Education.com
  14. 14. When Alcoa found out thatBoeing intended to use carbon fiber reinforced plastics on its Dreamliner the companylooked for an alternative that it could make www.Options-Trading-Education.com
  15. 15. It had to be competitive in beingstronger, lighter, corrosion resistant, and cheaper.www.Options-Trading-Education.com
  16. 16. The technology theydeveloped was aluminum- lithium.www.Options-Trading-Education.com
  17. 17. According to Alcoa, using aluminum-lithium instead of composites will improve fuel efficiency by a forth, reduceweight by as much as a tenth, www.Options-Trading-Education.com
  18. 18. and result in a product thatrequires roughly half as many inspections over time for structural problems and corrosion issues. www.Options-Trading-Education.com
  19. 19. As with the use of compositesaluminum-lithium results in an airplane with better humidity control and larger windows. www.Options-Trading-Education.com
  20. 20. In the world today there are over eight thousand commercial aircraft on order.This amounts to eight years of aircraft production. www.Options-Trading-Education.com
  21. 21. These would also appear tobe good reasons to buy calls on Alcoa. www.Options-Trading-Education.com
  22. 22. Today’s leading aircraft makers are Boeing and Airbus.www.Options-Trading-Education.com
  23. 23. However, Embraer in Brazil, Comac in China, andRussian manufacturers all are on the rise. www.Options-Trading-Education.com
  24. 24. Given time these companieswill 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. www.Options-Trading-Education.com
  25. 25. Succeeding in options tradingoften has to do with seeing the future and then timing thepurchase or sale of an options contract. www.Options-Trading-Education.com
  26. 26. Using Options to Get a Good Pricewww.Options-Trading-Education.com
  27. 27. Despite what could be a rosy future for Alcoa in making parts for the automotive andaerospace industries the stock is down today due to low aluminum prices. www.Options-Trading-Education.com
  28. 28. Options traders can buy calls on Alcoa simply to make a short term profit. www.Options-Trading-Education.com
  29. 29. However, long term investorscan also buy calls on Alcoa in order to buy the stock at a depressed price prior to aglobal economic recovery and more profits for Alcoa. www.Options-Trading-Education.com
  30. 30. Risk management in option trading allows investors tostake out positions very cost effectively and not buy until the stock goes up. www.Options-Trading-Education.com
  31. 31. For more insights and usefulinformation regarding options and options trading, visit www.Options-Trading- Education.com.

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