Despite the worries surrounding the government shutdown, the market continued its winning ways last week as the S&P 500 and Dow both rallied 1.1%, and the Nasdaq added 1.3%.
The Stock – Century Aluminum (CENX)
Supply gluts of aluminum have been the norm for many years, but the global market for the metal is now facing major deficits—a “novelty” for the industry, according to one major bank—which in turn is boosting prices. A range of political developments—including aluminum-targeted tariffs in Washington, high energy costs for certain African producers, the loss of mining licenses in Guinea (the world’s largest producer of bauxite, the main aluminum ore) and reductions in annual production targets in China—have contributed to the shortfall.
Century is well positioned to benefit from this development, as the U.S.-based producer is expected to see diminished competition due to U.S. tariffs on the metal, allowing it to sell its output at higher margins. Indeed, the company has planned for new smelter capacity to take advantage of the tariffs on foreign aluminum, including a restart of its Mt. Holly, South Carolina smelter, currently operating at 75% capacity, to bring it to full capacity (more than 50,000 metric tons) by next June. Century intends to invest $50 million in the effort, which will expand total U.S. aluminum production by nearly 10%. Moreover, it’s also exploring a potential new smelter to further increase domestic production, which it said would double the size of the existing U.S. aluminum industry (although a site has not yet been selected).
On the financial front, revenue of $628 million in Q2 increased 12% year over year, earnings of 30 cents a share jumped from a penny a year ago (though that missed estimates by four cents), while adjusted EBITDA of $74 million more than doubled, thanks in part to higher metal and regional premium prices. On the earnings call, management pointed out that global aluminum inventories were near post-financial-crisis lows in Q2 (at 47 days), with U.S. demand for domestically produced billets (blocks or bars of the processed metal) growing 8% in the first half of the year due to the tariffs. The outfit further expects the “strong domestic demand growth” to support higher value-added aluminum premiums in 2026.
Looking ahead, Wall Street sees earnings running up meaningfully this year and growing 30% in 2026, which is likely too conservative given the increasingly positive fundamentals.
Technical Analysis
CENX chopped its way higher into late last year, but then shares turned down, eventually falling about 50% during the market’s early-year plunge. The recovery from there was choppy but solid, with shares approaching their highs in early August before one last, controlled dip down to the 10-week line. But CENX broke out after that, and it just rose for its fourth straight week—all on above-average volume. Stop – 24
The Covered Call Trade
Buy Century Aluminum (CENX) Stock at 31, Sell to Open November 31 Strike Calls (exp. 11/21) for $3, or a Net Price of 28 or less
Static Return: $300 per covered call (10.71%)
Breakeven: 28
Covered Call Return (if assigned): $300 per covered call (10.71%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 28 or less. (In this case 31 minus 3 = 28. Or another example is you could pay 31.20 for the stock and sell the call for 3.20, which also equals 28)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| PureStorage (PSTG) | 77.85 | 91 | 64 | October 75 -- $5.90 | $16.00 |
| Kratos Defense (KTOS) | 63 | 102 | 57 | October 62.5 -- $4.90 | $39.50 |
| Cameco (CCJ) | 81.5 | 87 | 74 | October 80 - $5.45 | $7.00 |
| Coupang (CPNG) | 32.45 | 32.5 | 29 | October 32 -- $1.20 | $1.20 |
| Lyft (LYFT) | 22.3 | 22 | 18.1 | October 23 -- $0.75 | $0.50 |
The next Cabot Profit Booster issue will be published on October 14, 2025.
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