Defense stocks like RTX Corp look attractive to value investors and OTM option plays

Defense stocks viz RTX Corp (RTX)The parent of Raytheon, Collins, and Pratt & Whitney, looks attractive to value buyers. Short sellers sell out-of-the-money RTX puts and calls, because they have a high premium.

RTX is in $208.21 On Monday, March 9, 2026 at Noon Business. That’s up from $195.98 on February 25, shortly before the start of the Iran war. As a result, the option premium has increased, especially for one-month expirations. It is worth shortening them.

For example, see April 10, 2026, as the expiration date. It shows that you can earn around 2% shorting puts and strike rates of 5-6% out of the money (OTM).

Here is what I mean. The $220.00 strike price call option contract for April 10 has a midpoint premium of $4.18. Here’s how you calculate the yield for the covered year:

$418 / $20,928 = 0.1997 = 2.0% 1 month yield

In other words, if you buy 100 RTX shares at $208.84, you can “sell to open” a 1-year option contract for $220.00 and immediately receive $418.00 in your account. It works with a yield of 2.0% of a penny.

Furthermore, if RTX stock rises to $220, investors retain capital gains. So, it is possible to make another 5.1%, for a total return of 7.1% in the next month.

In addition, more risk-averse investors can sell short the $225.00 strike price call. This yield almost works 1.5% (For example, $3.09/$209.29 = 0.01476).

This contract has a low delta ratio (25%) and may not require investors to sell their shares (if RTX is below $225), based on volatility patterns. However, the strike rate is 7.5% higher.

Furthermore, on average, if an investor were to short both contracts, the result would be an OTM play that is an average of 6.3% higher than today’s price. The average yield is 1.75%.

Another way to play this game is to sell short out of the money. Thus, an investor must sell RTX shares and still collect income.

For example, the April 10 expiration shows that the $195.00 put option contract, which is 6.8% lower than today’s price (ie, it’s out-of-the-money or OTM), has a midpoint premium of $3.47.

This means that a short seller who saves $19,500 with a brokerage firm (ie, 100 x $195.00 strike price), can accumulate $347.00 in his account. It works 1.8% One month yield:

$347/$19,500 = 0.01779 = 1.78% for a month

This means that as long as RTX stock remains above $195.00, the investor’s warrant will not be determined to buy 100 shares at $195.00.

However, even if this happens, the breakeven is very low:

$195.00 – $3.47 = $191.53 B/E

This is 8.48% lower than today’s price. Furthermore, it has the same 25% chance of happening based on the delta ratio in the table above.

This is a good way for an investor to set low buy points in RTX and also earn income.

The bottom line is that putting out-of-the-money and shorting calls on RTX stock in a month’s time is a very attractive way to make money.

As of the date of publication, Mark R. Heck, CFA held no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com