Lockheed Martin Corporation (LMT) has been a strong growth stock during the past couple of years. In fact, LMT stock is up nearly 130% since the start of 2013.
Despite its popularity with buy-and-hold investors, Lockheed Martin shouldn’t be overlooked by options traders. The stock looks especially enticing with Lockheed’s third-quarter earnings report slated to hit the Street on Tuesday next week.
Diving into the numbers, Lockheed Martin expected to post a profit of $2.72 per share for the third-quarter, with revenue anticipated at $11.14 billion. Historically, the company’s fundamentals line up nicely with LMT stock’s technicals, as Lockheed Martin has bested the consensus target in each quarter since 2012.
Not surprisingly, EarningsWhisper.com reports that some anlaysts may have set their targets a bit higher. Specifically, Lockheed Martin’s third-quarter whisper number arrives at $2.81 per share.
Bullish sentiment is also noticeable in LMT stock’s ratings backdrop. In fact, the shares have attracted eight “buy” ratings, compared to nine “holds” and no “sell” ratings. That said, the average 12-month price target of $222 rests a mere 6.2% above current prices.
Options traders are also leaning bullish when it comes to LMT. Specifically, the stock’s November/December put/call open interest ratio arrives at 0.74, with calls easily outnumbering puts heading into Lockheed Martin’s earnings report.
Click to EnlargeOverall, November implieds are pricing in a potential post-earnings move of about 4.5% for LMT stock. This places the upper bound at $219.49, while the lower bound resides at $200.51.
Technically, LMT stock is looking up at its 10-day trendline and the $15 region following a recent retreat from overhead resistance. However, the shares should find staunch support in the $200 to $210 region, and another earnings beat could provide the spark needed to overcome short-term resistance.
2 Trades for LMT Stock
Call Spread: With solid fundamentals and technicals supporting LMT, the path of least resistance appears to be to the upside. Traders looking to take a chance on LMT ahead of earnings might want to consider a November $210/$220 bull call spread.
At last check, this spread was offered at $3.50, or $350 per pair of contracts. Breakeven lies at $213.50, while a maximum profit of $6.50, or $650 per pair of contracts, is possible if LMT stock closes at or above $220 when November options expire.
Put Sell: For more cautious traders, selling a deep out-of-the-money put may be just the way to bank a little profit while relying on technical support. At last check, the November $190 put was bid at 80 cents, or $80 per contract.
As long as LMT trades above $190 through November expiration, traders will keep the premium received. If LMT trades below $190 ahead of expiration, however, traders could be assigned 100 shares of LMT stock for every put sold at a cost of $190 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
