Options Traders Bet on Another Strong November for Raytheon Stock

RTN shares tend to outperform in November

Oct 26, 2017 at 12:26 PM
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Despite earlier hitting a record high of $190.25, Raytheon Company (NYSE:RTN) was last seen trading 9% lower at $180.38. The company this morning released third-quarter earnings that topped estimates, but revenue missed and Vertical Research deemed the quarter "good but not great." The shares are on pace for their lowest close since Sept. 14, and their first below the 50-day moving average since April. This all comes as Raytheon stock enters a very bullish time of year.

rtn stock

For instance, the defense contractor appeared on our list of the best stocks to buy in November. The shares have closed the month higher eight of the past 10 years, averaging a gain of 3.7%. A number of options traders are seemingly betting on history repeating itself.

Specifically, a large increase in open interest during the past two weeks has made the November 190 call home to peak open interest on the equity, at almost three times as much as the next closest position. Data from the major options exchanges shows heavy buy-to-open activity at this strike during the past 10 days, so many traders are looking for the stock to rise back atop $190 by the close on Friday, Nov. 17, when the front-month options expire.

It's not surprising to note that there's apparent sell-to-close activity occurring at the call today. In fact, it's the most traded contract so far, with more than 2,215 options traded. Still, this is just a drop in the bucket compared to the 15,000 contracts that were in residence here coming into today, so for now it appears bulls are holding out hope RTN turns things around.

For what it's worth, Raytheon stock fell almost 4% after its October earnings release last year but quickly rebounded on the charts. Of course, Donald Trump's election win played a large role in the subsequent rally, providing a lift to the entire defense sector.

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