Options Trading: Analyzing Implied Volatility and Strategies
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 12 2026
0mins
Source: CNBC
- Implied vs. Realized Volatility: Over the past year, U.S. stocks with a narrow implied vs. realized volatility spread outperformed those with a wide spread by over 20%, highlighting the importance of selecting the right underlyings to enhance the probability of favorable returns.
- Factor Strategy Application: Applying classic equity factors such as momentum and sentiment in options trading can effectively improve trade selection and management efficiency, leading to better short-term performance outcomes.
- Screening Criteria and Candidates: By filtering for stocks in the top quintile of EBITDA/EV, only 15 candidates remain, including Alcoa, which is expected to report earnings on January 22 with an implied price move of 10.5%.
- Risk Management Strategy: Given Alcoa's overextended position relative to long-term moving averages, traders might consider protective put spreads to mitigate potential downside risks and secure their investments ahead of the earnings report.
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Analyst Views on AA
Wall Street analysts forecast AA stock price to fall over the next 12 months. According to Wall Street analysts, the average 1-year price target for AA is 46.00 USD with a low forecast of 33.00 USD and a high forecast of 58.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
10 Analyst Rating
6 Buy
2 Hold
2 Sell
Moderate Buy
Current: 60.640
Low
33.00
Averages
46.00
High
58.00
Current: 60.640
Low
33.00
Averages
46.00
High
58.00
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, which generally 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 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 26 operating locations across nine countries on six continents.
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.
Aluminum Prices Surge to Four-Year High as Dollar Weakens
- Aluminum Price Surge: Aluminum futures on the London Metal Exchange rose 2.3% to $3,387 per metric ton, marking a nearly four-year high, reflecting strong demand for base metals and bullish investor sentiment.
- Dollar Weakness Impact: Trump's comments expressing indifference towards the dollar's decline intensified bearish sentiment in the market, leading to price increases in aluminum and other base metals, with copper up 1.5% and zinc up 1.9%.
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- Supply and Demand Dynamics: Low global aluminum inventories and concerns over power availability for new Indonesian smelters, coupled with rising demand from electric vehicles and grid requirements, have supported the price rally, despite Goldman forecasting a drop to $2,400 per ton in the future.
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Alcoa Stock Rises Despite Downgrade by Morgan Stanley
- Rating Downgrade: Morgan Stanley downgraded Alcoa (AA) from Overweight to Equal Weight with a $64 price target, citing a more balanced risk-reward after the stock's nearly 50% rise since December 1.
- Productivity Initiatives: Alcoa is implementing several measures to enhance productivity, reduce costs, and optimize its asset portfolio, while also expecting $50M-$60M annually in IRA production tax credits for U.S. aluminum, bolstering profitability.
- Market Conditions: A tighter aluminum market is expected to sustain profitability, with U.S. regional premiums reflecting a 50% tariff; Alcoa has identified 10 high-priority curtailed sites for potential conversion to hyperscale data centers.
- Transaction Delays: The timeline for transforming curtailed sites into data centers continues to be pushed back, and escalating trade tensions between the U.S. and Canada suggest that obtaining a Section 232 exemption for Canadian aluminum may become more challenging.
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