Alcoa Capitalizes on Rising Aluminum Prices with Strategic Options Trading
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 18 2026
0mins
Source: CNBC
- Aluminum Price Surge: Driven by geopolitical tensions in the Middle East and tightening global supply, LME aluminum prices have reached four-year highs, creating a favorable market environment for Alcoa that is expected to boost company performance.
- Investment Strategy: By executing a June $70 buy-write strategy, investors can purchase Alcoa shares at $62.50 and sell call options at $1.80, optimizing returns while managing volatility, with a maximum gain potential of $930.
- Financial Strength: Alcoa aims to reduce its debt from $2.5 billion to between $1 billion and $1.5 billion while investing $65 million in its low-carbon smelter in Norway, demonstrating a commitment to improving financial health and sustainability.
- Market Challenges: Despite strong performance in the aluminum segment, Alcoa's alumina segment reported a negative EBITDA of $40 million due to global price pressures and rising energy costs, highlighting challenges faced in diversifying its business.
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Analyst Views on AA
Wall Street analysts forecast AA stock price to fall
8 Analyst Rating
2 Buy
4 Hold
2 Sell
Hold
Current: 75.580
Low
38.00
Averages
57.63
High
78.00
Current: 75.580
Low
38.00
Averages
57.63
High
78.00
About AA
Alcoa Corporation is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting and casting), and energy generation. The Company's operations are comprised of two business segments: Alumina and Aluminum. The Alumina segment primarily consists of its bauxite mines and alumina refineries, and its operations include the mining of bauxite and other aluminous ores, as well as the refining, production, and sale of smelter grade and non-metallurgical alumina. The alumina produced by this segment is sold primarily to internal and external aluminum smelter customers; a portion of the alumina is sold to external customers who process it into industrial chemical products. The Aluminum segment consists of the Company's aluminum smelting and casting operations along with the Company's energy production assets in Brazil, Canada, and the United States. It has direct and indirect ownership of over 25 operating locations across eight countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Capacity Increase: The expansion will boost the plant's annual capacity by approximately 160,000 metric tonnes, reaching a total of 220,000 metric tonnes, utilizing low-carbon AP60 smelting technology to facilitate the industry's transition to carbon-free electrolysis.
- Government Investment: Canada's Minister of Industry announced a C$100 million ($72.55 million) investment in the ELYSIS technology deployment project, aimed at protecting workers, strengthening domestic supply chains, and enhancing economic resilience.
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See More
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- China's Aluminum Production: Official data revealed that China's aluminum smelters produced a record daily output of 129,000 tons last month, although fears of nationwide inspections on energy use and emissions have led to cautious market expectations regarding future production levels.
- Middle East Supply Crisis: The International Aluminium Institute reported that aluminum production from the Persian Gulf fell to its lowest level in over a decade in April, with the region accounting for approximately 20% of non-Chinese aluminum production, crucial for buyers in Japan, South Korea, the EU, and the U.S.
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See More
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- Market Risk Warning: Industry experts caution that if countries act independently, it could lead to oversupply, reminiscent of the 1980s 'butter mountains' phenomenon, which would depress prices and destabilize global markets.
- Emerging Coordination Mechanism: The G7 is discussing the establishment of a permanent secretariat to ensure the sustainability of critical mineral supply plans, aiming to mitigate the risks of over-investment through global coordination.
- Successful Case Studies: The Democratic Republic of Congo has successfully increased global prices by setting export quotas and stockpiling cobalt, but prolonged restrictions could lead to demand erosion, necessitating careful policy balance to maintain market stability.
See More
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- Rising Inflation Expectations: The 1-year inflation expectations for May were revised upward to 4.8%, exceeding the expected 4.6%, potentially prompting the Federal Reserve to consider interest rate hikes in upcoming meetings, which could pressure the stock market.
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See More
