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By David Russell

Alcoa (NYSE:AA) dropped on a lukewarm earnings report this week, and now some investors are licking their wounds and hoping for a bounce.

Our tracking systems detected the purchase of about 13,500 April 18 puts for $1.25 and $1.26 against existing open interest. A matching number of May 18 puts were sold for $1.44, indicating that a short position was rolled from one month to the next. The move was likely the work of a trader who had sold the April 18 puts before earnings, hoping the stock would hold its ground. But now that it's fallen, their position is underwater. Rolling it gives them more time for AA to rebound and lets them collect an additional $0.22 of income.

The aluminum giant is down 0.90 percent to $16.55 in early afternoon trading, following a 6 percent drop yesterday. The shares rallied hard since late August and peaked at a two-year high of $18.47 last week, but fell after revenue missed estimates Monday afternoon.

There was also a sale of about 11,000 July 19 puts for $2.49 to $2.66, which reflects a belief that AA will hold its ground or rebound from the current level.

Puts outnumber calls in the stock by almost 4 to 1 so far today, with selling and rolls of short positions accounting for most of the activity.

Source: Put Sellers Licking Wounds as Alcoa Falls