Bear hunts for more Chalco downside

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Aluminum Corporation of China has been plunging since early 2010, and one bear is wagering on further downside.

ACH Chart optionMONSTER's Depth Charge tracking system detected the purchase of 750 January 19 puts for $2.84 and the sale of an equal number of January 20 calls for about the same price. The transaction resulted in a net cost of approximately zero and drove options volume in the metal company to more than triple the daily average.

ACH up 0.05 percent to $19.66 in afternoon trading but is down 39 percent since hitting a 19-month high of $34.27 on Jan. 11. It then rolled over after hitting resistance at its 200-day moving average in April (see chart) and has been dropping like a rock since.

The shares didn't get any relief after the company, also known as Chalco, reported a profit on April 20 and said demand was improving. Yesterday ACH said it may freeze a $2.5 billion bauxite plant in Australia in response to a proposed tax on resource producers.

The stock has also been hit by weakness in the metals and materials sector since early April as investors worry the global economic recovery may be slowing.

Today's option trade, known as a bearish combination, simulates a short position in the stock. It will make money if ACH falls below $19 and lose money if it climbs above $20.

(Chart courtesy of tradeMONSTER)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: ACH

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