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Is It Too Late to Get into Defense Stocks?
North Korea tested a nuclear bomb and all stocks went down with the exception of defense stocks. As the North Korean drama plays out, for good or for ill, these investments will do well. Is it too late to get into defense stocks? cnbc writes that defense stocks surge on tensions and consolidation in the industry.
defense stocks rose broadly tuesday as tension between north korea and the west mounted. investors also loaded up on these names after a blockbuster merger deal.
shares of raytheon rose 0.6 percent to a new all-time high, while lockheed martin also advanced even as the broader market declined on the increased geopolitical tensions.
defense shares have been among the best-performing stocks under president donald trump. lockheed and raytheon shares are up more than 20 percent this year, whole northrop’s stock has risen more than 15 percent.
It is possible that the run up of defense stocks in the Trump era has anticipated future gains. If that is the case it is too late to get into defense stocks. And what happens when things cool down on the Korean Peninsula? How about put options or shorts?
Puts on Defense?
If you bought defense stocks when Trump entered office you have seen a nice run up in value. Increased tensions in East Asia can only help your stocks. But what happens next? Put options on defense stocks will preserve your opportunity to profit if prices go up while protecting your holding if peace breaks out and there is a correction. options-trading-education.com explains call and put options.
a call contract gives the buyer the option to purchase the underlying equity which he will do if the equity price moves in the direction anticipated. a call contract confers an obligation on the seller (writer) of the call option to sell the underlying equity if the buyer executes the contract. similarly a put contract gives the buyer the option to sell the underlying equity which he will do if the equity price moves in the direction anticipated. a put contract confers an obligation on the seller (writer) of the put option to buy the underlying equity if the buyer executes the contract.