Defense Stocks Like RTX Corp Look Attractive for Value Investors and OTM Options Plays

Defense actions such as RTX Corp (RTX)parent of Raytheon, Collins and Pratt & Whitney, appears attractive to value buyers. Short sellers are selling out-of-the-money RTX calls and puts as they command high premiums.

RTX is on $208.21 in midday trading on Monday, March 9, 2026. That’s up from $195.98 on Feb. 25, a low just before the war with Iran began. As a result, the premiums on its options have increased, especially those that expire in one month. That makes them worth shorting.

For example, look at the expiration period of April 10, 2026. It shows that you can earn around 2% on short puts and call options with 5-6% out-of-the-money (OTM) strike prices.

This is what I mean. The call option contract with a strike price of $220.00 for April 10 has a midpoint premium of $4.18. This is how the covered call yield is calculated:

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

In other words, if you buy 100 RTX shares at $208.84, you can “sell to open” 1 call option contract at $220.00 and immediately receive $418.00 in your account. That equates to a 2.0% return for a single coin.

Additionally, if RTX stock rises to $220, the investor keeps the capital gain. Therefore, it is possible to gain another 5.1%, for a total return of 7.1% over the next month.

Additionally, more risk-averse investors can short the $225.00 strike price. This performance is equivalent to approximately 1.5% (i.e. $3.09/$209.29 = 0.01476).

This contract has a lower delta ratio (25%) and depending on volatility patterns, may not require the investor to sell their shares (if RTX stays below $225). After all, the strike price is 7.5% higher.

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

Another way to play this is to sell short out-of-the-money puts. That way, an investor doesn’t have to sell RTX shares and still earn income.

For example, the April 10 expiration period shows that the $195.00 put option contract, which is 6.8% lower than the current price (i.e., it is out-of-the-money or OTM), has a mid-sell point premium of $3.47.

That means that a short seller who locks in $19,500 with the brokerage firm (i.e. 100 x $195.00 strike price), can cash out $347.00 in their account. This results in a 1.8% one month performance:

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

That means that as long as RTX stock remains above $195.00, an investor’s collateral to purchase 100 shares at $195.00 will not be allocated.

However, even if that happens, the break-even point is much lower:

$195.00 – $3.47 = $191.53 B/E

That’s 8.48% less than the current price. Additionally, this has a similar 25% chance of occurring, based on the delta ratio in the table above.

This is a great way for an investor to set a lower buy point on RTX and also earn income.

The bottom line is that shorting out-of-the-money calls and puts on RTX stock in one-month periods is a very attractive way to make money.

On the date of publication, Mark R. Hake, CFA had no (directly or indirectly) positions 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