Alcoa, Inc. (NYSE: AA) shares are rising today after a memo was disclosed which revealed that AA and Aluminum Corp. of China (NYSE: ACH) formed a special purpose vehicle, "with the intent to acquire up to 14.9%" of Rio Tinto's (NYSE: RTP) London-listed stock. The two had bought a 12% stake in Rio Tinto in January. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AA.

After hitting a one-year high of $48.77 in July, the stock hit a one-year low of $26.69 in January. AA opened this morning at $36.01. So far today the stock has hit a low of $35.71 and a high of $36.42. As of 10:25, AA is trading at $36.05, up 54 cents (1.5%). The chart for AA looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $27.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just two months as long as AA is above $27.50 at April expiration. Alcoa would have to fall by more than 23% before we would start to lose money.

AA hasn't been below $27.50 by more than a few cents in the past year and has shown support around $34 recently. This trade could be risky if the US economy continues to worsen, but even if that happens, this position could be protected by the support the stock might find around $28, where the stock bottomed out in January.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AA, ACH or RTP.