Alcoa (AA, $32.33, down $1.06) reported better-than-expected earnings after the bell, lifting its stock higher in after-hours trading. The company reported earnings $546 million or $0.66/ share versus estimates of $0.64/ share. Revenue for the quarter dipped to $7.6 billion from $8.1 billion a year earlier. Wall Street estimates were at $7.2 billion.

The company beat on earnings per share and sales but how will the market react to the 25% drop in profits? This is what makes an option trade so risky on an earnings announcement. Higher aluminum prices and sales volumes certainly helped with the increased costs of energy and raw materials for Alcoa but the bottom line is Alcoa posted lower year-over year results.

Monday the stock hit a high of $34.54 but finished the day at $33.39. Today it lost a buck then in after-hours it gained that buck back and was last seen trading at $33.45. So basically the stock has gone nowhere since its July 2nd close of $32.11. The gains in after-hours trading cannot be counted as an official closing price but either way, expect Alcoa to be active on Wednesday.

Rick Rouse
Rick@OptionsMentoring.com