Small Cap Options Flow

Century Aluminum (CENX) saw an unusual large bull spread opening on Thursday 7/24 into the recent strength for the small cap materials name as 5000 January $16 puts sold to open at $0.70 to buy 5000 Jan $24 calls at $3.20 and seemed to buy the $35 calls also at $0.94. This spread would be quite bullish even if it were a normal vertical spread capping gains at 35 on the upside but with both call strikes bought it shows potential for multi-year breakout setting up north of 30 as the weekly chart recently had a fresh breakout from its range and possible cup and handle pattern emerging. CENX rarely sees size like this in the options market so clearly notable and could see a large move into year end. Some recent smaller notable trades in open interest include the 2000 Sept $21 puts sold to open at $1.25 this week as well and still has 600 December $22 short puts in OI from early June sellers.

The $2.1B materials company trades at 12X earnings, 6.7X EBITDA, 1.0X sales, with revenues rising +9% in FY25 and estimated to grow +2% in FY26. Century Aluminum Company, together with its subsidiaries, produces and sells standard-grade and value-added primary aluminum products in the United States and Iceland. It also owns and operates a carbon anode production facility located in Vlissingen, the Netherlands, as well as engages in the bauxite mining and alumina refining business in Jamaica. The company plays a pivotal role in meeting domestic aluminum demand, especially as U.S. production represents only a small fraction of global output. Century has been selected by the U.S. Department of Energy to receive up to $500 million to build a new, green aluminum smelter—the first in the U.S. in over 45 years. This project is expected to double domestic smelting capacity, create significant employment, and support the green energy transition. Such government backing creates a powerful policy tailwind, positioning the company as a key player in the “reindustrialization” narrative and increasing supply chain resilience.

The average analyst price target is $23. BMO upgraded to Outperform earlier in the year and cited valuation as being compelling when under the $20 level as they also see the company’s profitability profile has improved with the acquisition of 55% of the Jamalco refinery and from the 45X credit. Wolfe has an Outperform and $27 target seeing higher alumina prices continuing to boost EBITDA estimates through 2025. Short interest is 6.8%. Hedge fund ownership rose 10%. Boston Partners started a new position with 394K shares last quarter.