Alcoa is hard at work making the best of the situation. Aluminum market prices fell 8% while Alcoa managed to hold on to 97% of revenue. Special items filled the earnings report with both positives and negatives. Asset sales, insurance proceeds, favorable tax treatment and reductions in European production made for an interesting spreadsheet on my computer, but in the end, it still boils down to the economy. The impressive tax rate for the quarter was about 27.4 percent.

OK, so the earnings report was less than stellar, albeit better than some feared, now what? How do we take Alcoa's earnings report and turn it into profit we can put in our pockets? For those familiar with my trading methods, it will not be a surprise I will go straight to the option chains to seek opportunity.

If I am a long term investor, and Alcoa enjoys the stability of many long term shareholders, I want to sell far out of the money calls with little likelihood of being exercised. For example, The June $10 strike calls may be sold for about seven cents. If Alcoa moves higher into the expiration date, simply buy the contracts back and roll over to the relevant expiration and strike price. The primary concept is protecting capital through selling Theta (option premium/time decay) until the economy shows signs of picking up and improving.

Those that want to gain exposure with Alcoa can sell June $8 puts for around 63 cents, resulting in a cost basis of $8 per share less the premium collected if the shares are put to you. The cost basis will be $7.37, but you can also immediately sell a call against the shares, bringing your cost basis to perhaps $7 a share with just as much upside potential as you started with.

For longer term stock positions, options are almost mandatory if you want to control risk and use the never ending ticking clock to enhance your returns. Maybe you're not totally comfortable with options math, or the best strikes and expiration dates that are most advantageous. Say hello to author Scott Nations through Wiley Publishing. Nations produced a remarkable options book titled "Options Math For Traders". I give the content and ease of reading both two thumbs up. You can't go wrong putting a copy in your hands to read. The cost of the book is much less than if you make an avoidable mistake because you didn't read it.

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