• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Trade Alert - (AA) January 5, 2015

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price.

Trade Alert - (AA)

Buy the Alcoa (AA) February, 2015 $17-$18 in-the-money vertical bear put spread at $0.88 or best

Opening Trade

1-5-2015

expiration date: February 20, 2015

Portfolio weighting: 10%

Number of Contracts = 123 contracts

 

You can buy this put spread anywhere within $0.80-$0.90 range and have a reasonable expectation of making money on this trade.

If you can?t do the Alcoa (AA) February, 2015 $17-$18 in-the-money vertical put spread, sell short the shares outright for a trade.

Alcoa is the world?s largest producer of aluminum (aluminum to you Brits), and its share price has long been driven by the health of the global aircraft industry.

In 2014, Alcoa earned immunity from the global commodity price collapse when Ford Motors (F) announced it would start manufacturing its ever popular F-150 pickup truck out of aluminum.

Since then, sales of the white metal trucks have not been as strong as initially hoped. Nor has its use spread to other manufacturers or models outside of the nascent electric car space.

In the meantime, global deflation has dramatically accelerated. Look no further than the price of oil, down by half, and the yield on German ten year bunds, an unbelievable 50 basis points.

As a long time friend of Federal Reserve governor Janet Yellen, I can tell you that deflation is going to last longer than anyone believes, and that interest rates are going to stay lower for longer. This is going to be bad news for aluminum producers of any stripe. You can forget about a rate rise in 2015.

Throw on top of that a very clear double top on the long-term charts for Alcoa, and I think we have found our short position for the first quarter of 2015.

Warning! With a low price and a large number of contracts, this trade is particularly sensitive to your commission rate. So if you are overpaying your broker, now is the time to have a conversation with them and negotiate your rates down. It?s easier than you think, especially on spread trades.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.

Here are the specific trades you need to execute this position:

Buy 123 February, 2015 (AA) $18 puts at?????$2.88

Sell short 123 February, 2015 (AA) $17 puts at..??.$2.00
Net Cost:??????????????????.....$0.88

Potential Profit: $1.00 - $0.88 = $0.12

(123 X 100 X $0.12) = $1,476 or 1.48% profit for the notional $100,000 portfolio.

 

AA 1-5-15

Alcoa Logo

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2015-01-05 11:11:552015-01-05 11:11:55Trade Alert - (AA) January 5, 2015

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: Trade Alert - (FXE) January 5, 2015 Link to: Trade Alert - (FXE) January 5, 2015 Trade Alert - (FXE) January 5, 2015 Link to: January 5, 2015 - MDT - Midday Missive Link to: January 5, 2015 - MDT - Midday Missive January 5, 2015 - MDT - Midday Missive
Scroll to top