I am going against my rules with today's recommendation. Please forgive me if the play goes badly.
NEW BULLISH Plays
ARNC - Arconic - Company Profile
Arconic Inc develops and manufactures engineered products and solutions for the aerospace, industrial gas turbine, commercial transportation and oil and gas markets. Company description from FinViz.com.
What that description does not tell you is that Arconic is the old Alcoa. Back in October Alcoa spun off the aluminum smelter business and named it Alcoa. The remaining hith tech manufacturing business they named Arconic. Basically, this is the profitable part of the old Alcoa. They produce all sorts of high tech aluminum products for nice profits.
Their Q4 earnings were mixed because of expenses incurred as a result of the spinoff.
Zacks reported Q1 estimates have risen from 20 cents to 25 cents over the last several weeks as analysts reevaluate the new company. Full year estimates have risen from 92 cents to $1.10, a 19.6% increase.
On Wednesday Arconic said it had sold 60% of the Alcoa stake it kept during the spinoff for $890 million and would use the money to pay down debt and buy back shares. They also retained loss carry forward tax credits that will offset future earnings.
Earnings May 2nd.
Shares went ballistic after the Q4 earnings and rose from $23 to $30. Every day I kept watching the stock and thinking, "ok, tomorrow they will dip and I will add them to the portfolio." They never dipped until this week. That dip was very shallow and has lasted only 3 days.
We never know. They could fall off a cliff tomorrow and retest the $23 pre-earnings. I seriously doubt it because funds have been adding Arconic as a new position.
I am going to recommend an options only strategy with a four-week duration. I am recommending we buy a $30 call and a $28 put. The total cost will be $1.52 and that is our total risk. We only need ARNC to move in either direction more than a couple bucks and we should be profitable.
Either way at least one option should be profitable and offset the cost of the other. Depending on the market we could actually profit on both if we got a big dip and then a big rebound. The only way we lose both premiums is if the stock holds at $29 for the next month. That is not likely.
Buy Mar $30 call, currently 95 cents. No stop loss.
Buy Mar $28 put, currently 57 cents, No stop loss.
NEW BEARISH Plays
No New Bearish Plays