Unusual Option Activity: Lockheed Martin (LMT)

Aerospace and defense contractor Lockheed Martin (LMT) is down 6 percent over the past year, and shares have dropped in recent weeks. One trader sees a rebound in the weeks ahead.

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  • That’s based on the March $430 calls. With 44 days until expiration, 9,167 contracts traded compared to a prior open interest of 263, for a 35-fold rise in volume on the trade. The buyer of the calls paid $8.70 to make the bullish bet.

    Lockheed shares recently traded for about $428, making this an at-the-money trade. Shares were trading closer to $460 just a few weeks ago, before being knocked down after earnings. Lockheed is significantly off its 52-week high of $508.10.

    Earnings and revenues have been flat at Lockheed over the past year, but the company’s long-term defense contracts have the ability to rise with inflation over time.

    At current prices, Lockheed trades at 16 times forward earnings.

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  • Action to take: Shares look oversold in the short-term and could see a rebound rally in the coming weeks, likely for low double-digit returns. At current prices, Lockheed also pays a 2.9 percent dividend.

    For traders, the March $430 calls play well to a short-term rebound in shares in the coming weeks. The option could easily move in-the-money and see mid-to-high double-digit returns before expiration.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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