A way to play Alcoa into earnings...

Volatility in the front month is running close to 100% going into earnings with vol in the back months and later at about 50%. One way to play this is to get short vol by way of a double calendar play. You could buy the 11 call calendar for $0.26 and the 10 put calendar for $0.23 . You would be selling 76% vol on the call calendar and selling 82% vol on the put calendar, while buying 46% and 48% vol. The break evens on this trade would be 9.50 and 11.66. This gives you about 12% to the downside and 8% to the upside. Options markets are factoring in about a 8.5% move. So your thesis would be that it will be at least less then this on a move to the upside and up too 12% on the downside, ideally less either way.

The average return for a 10 lot would be about $150.

I am not sure if I will take the trade, but I just thought I would share the idea.