Lockheed Martin Stock Soars After Earnings, Revenue Beat

LMT options are now affordably priced after earnings

Jake Scott
Jul 21, 2020 at 10:35 AM
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Lockheed Martin Corporation (NYSE:LMT) took a trip to the earnings confessional today, where the security company reported second-quarter earnings and revenue that topped Wall Street's estimates. Additionally, Lockheed Martin increased its 2020 full-year forecast. As a result, the shares of LMT are up 2.5%, last seen trading at $374.67.  

Out of the gate, today's rise put Lockheed Martin stock 10.3% down from its June 8, multi-month peak of $417.62. However, this is still well above the equity's mid-March, annual low of $266.11. LMT boasts a year-over-year gain of 2.4%, and is eyeing its sixth consecutive close above the 10-day moving average.

Meanwhile, the options pits are full of bullish activity. Lockheed Martin stock's 50-day call/put volume ratio of 2.95 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the elevated 90th percentile of its annual range. In other words, long calls are hot at the moment, and being ordered up at a quicker-than-usual clip. 

Today has proved more of the same, with calls trading at six times the average intraday amount and over double the number of puts exchanged so far. Most popular by far is the weekly 07/24 380-strike call, followed by the 385-strike call from the same series.

Analysts are optimistic as well, with six of eight brokers calling the stock a "strong buy." And now that earnings are over, a volatility crush means options are affordably marked. LMT's Schaeffer's Volatility Index (SVI) of 29% sits in the 17th percentiles of all other readings from the past year. This means options players are pricing in relatively low volatility expectations at the moment.

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