Rising aluminum prices are pushing up one of the Dow constituents. Click here to find out how to buy cheaply

Despite problems with aluminum production costs and shipping timing, Alcohol (AA) It takes advantage of its structurally high price.

LME aluminum prices have recently soared to a four-year high due to geopolitical tensions in the Middle East and tightening global supply balances. This favorable macro price environment creates attractive opportunities for buy-write (covered call) strategies that optimize returns while managing cyclical volatility.

Some describe the buy-write strategy as a gateway trade for many new options traders. By selling an upside call, you can buy the stock at a lower price in exchange for suppressing the upside.

$70 buy and write for June. Buy the stock near $62.50. Sell ​​the June $70 strike call for $1.80. Maximum loss: $6070 Maximum profit: $930Skill level: Beginner

A buy-write on AA allows investors to earn a premium from the increase in the stock’s implied volatility. Buying Alcoa stock and selling out-of-the-money call options at the same time can generate income quickly. This premium effectively boosts Alcoa’s modest $0.10 per quarter dividend, establishes solid “positive carry,” lowers its net cost basis, and provides a modest buffer against short-term downside, especially if you continue to roll covered call positions.

If the stock goes nowhere, you keep that $1.80 as a premium, creating a synthetic yield. If the stock price declines, the $1.80 premium collected acts as a buffer, so in this case the loss will not occur until $60.70 ($62.50 stock price minus the $1.80 collected). If Alcoa rises above $70 by the June deadline, your shares will expire, but you will have collected $1.80 and made a 12% profit on the stock portion of the trade.

Supply shocks led to successive increases in the realized price of primary aluminum, boosting Alcoa’s aluminum division’s EBITDA and management reaffirming its full-year production and shipment outlook for 2026. The company is aggressively investing $65 million in its low-carbon Moschen smelter in Norway, while also using cash to fully retire $219 million of high-cost debt, thereby strengthening its balance sheet.

The company aims to reduce its debt to between $1 billion and $1.5 billion, from the current $2.5 billion. (Note that the company had approximately $2.8 billion in cash as of its March 31 earnings report and is expected to have free cash flow of $813 million in fiscal 2027).

While the metals segment performed well, Alcoa’s alumina segment recorded negative EBITDA of $40 million due to continued global price pressures, rising energy costs and freight headwinds. Supply lines rely heavily on complex global shipping routes such as the Strait of Hormuz. Additionally, fluctuating Section 232 tariff costs could pressure import margins.

Alcoa represents a major structural upside for investors who believe aluminum prices will continue to rise due to a lack of supply. Implementing a buy-write strategy can help you monetize today’s high option pricing and turn low-yielding stocks into cash flow generators while weathering volatile commodity cycles.