Aluminum Corp. of China (ACH) on the move

Aluminum Corp. of China Ltd. (NYSE: ACH) stock is slumping today as aluminum futures are off by more than 2% as are other industrial metals like copper. Investors may also be locking in their gains after Friday's big positive move. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ACH

The stock has been climbing steadily all year, hitting a one-year high of $76.99 on Friday. This morning, ACH opened at $74.00. So far today the stock has hit a low of $72.78 and a high of $75.33. As of 11:00, ACH is trading at $74.92, down $1.93 (-2.5%). The chart for ACH looks bullish but slightly deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $85 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverages nice returns. For this particular trade, we will make a 6.4% return in 2 weeks as long as ACH is below $85 at October expiration. Chalco would have to rise by more than 33% before we would start to lose money. The stock has never been above $77 and would have to jump by over 14% in less than two weeks to cause a problem.

Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ACH.