Call Options Pop On Red-Hot Raytheon Stock

Trump's arms agreement with Saudi Arabia has stoked tailwinds for Raytheon shares

May 22, 2017 at 2:48 PM
    facebook twitter linkedin


    Defense stocks are trading higher today, after President Donald Trump signed a $350 billion arms deal with several Middle East states. Saudi Arabia also inked deals with several private companies, including Boeing, Lockheed Martin, and Raytheon Company (NYSE:RTN) -- with shares of each trading higher. Meanwhile, RTN options volume is accelerated, with nearly 4,700 contracts exchanged, or 1.6 times the expected intraday rate.

    The two most active RTN options so far are the June 165 and 170 calls, where it looks like some of the action may be of the buy-to-open kind. This echoes a recent trend seen in Raytheon's options pits, with these front-month strikes seeing the two biggest increases in open interest over the past 10 trading sessions. Data from the major options exchanges confirms new positions were purchased, meaning call buyers expect RTN stock to break out above the strikes by expiration at the close on Friday, June 16.

    This penchant for long calls relative to puts is unusual for RTN options traders. Specifically, the stock's 10-day put/call volume ratio of 9.52 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 99th annual percentile.

    It's a prime time for these premium buyers to strike on RTN stock, too. Raytheon's Schaeffer's Volatility Index (SVI) of 15% is docked below 66% of all comparable readings taken in the past year. In other words, low volatility expectations are currently being priced into RTN's short-term options.

    At last check, Raytheon stock was trading up 0.6% at $161.19, and earlier hit a record high of $163.57. Longer term, RTN shares have surged more than 24% year-over-year -- finding support atop a trendline connecting a series of higher lows since early November.
     

    Stop leaving money on the table with the same old broken options trading approach...

    There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

     
    Schaeffer's Daily Bulletin Offer
     


     


     
    Special Offers from Schaeffer's Trading Partners