Alcoa's Dividend Slash: What Options Say

Put options are trading heavily in Alcoa as it continues to fall since slashing its divided by 82 percent Monday.

AA stock gapped down to $5.41 on yesterday's (Tuesday's) open and closed at $5.59, down 8.7 percent on the session and 12.7 percent from a high of $6.40 the day before. (Ticker above reflects the current share price.) The aluminum giant is nearing its March 3 low of $4.97 after coming into 2009 above $12.

Options traders are buying the March 5 puts, where more than 48,000 changed hands yesterday against open interest of 11,580 contracts, according to OptionMonster's tracking systems. These were going off all day in mostly small trades, though there is some evidence of institutional action as well.

Almost 54,000 puts changed hands at the April 5 strike, though that is less than the open interest of 65,999 contracts and therefore could be closing positions.

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Chris McKhann is an analyst and writer for OptionMonster.