I reiterate my recommendation of LMT Beurre, however, in light of the FBI letter on Friday, a cautious and speculative hedging strategy, called a straddle is imperative for those who already purchased the out of the money puts or who shorted the LMT stock.
The 1/20/17 $270 calls selling for $0.70 are an inexpensive hedge to purchase against an extreme loss in the out of the money puts or shorting LMT stock. More risk seeking accounts can even go as high as the LMT $280 1/20/17 calls selling for $0.25, depending on Trump’s emphasis on defense spending leading up to the election. Trump, would most likely, close the gap on the F-35A program and it is forecasted, “that if the funding lands before year-end, it will generate $5.7 billion in operating cash flow for 2016. If not, that number would fall to $5 billion.” Chief Financial Officer Bruce Tanner said on a third-quarter earnings call with analysts, “We remain hopeful that this situation will be resolved soon, but have concerns with receiving collections before year-end.”
The rally in LMT from $248.37 on Friday, shortly after the FBI letter was released, fizzled as the stock drove up to $250.17 but retreated to being down $0.53 to close at $248.00. Adding fuel to the fire was the announcement that Turkey would purchase a shipment of F-35As in 2018 followed by orders in 2021 and 2022 and India is seeking a contractor to build and assemble fighters in India.
Adding confusion is a GOP insider from the Bush administration, Richard Painter and Senate Minority Leader, Harry Reid, publishing extreme criticism, even breaking of the law, of James Comey, the FBI director who authored the letter.
CHK opinion is the same, since beyond the fundamentals of an exponential increase in demand of LNG, Trump administration federal spending estimates would demolish the dollar and barometers of inflation like crude oil and gold will soar.