What is the expected volatility range for LMT around the lawsuit filing and subsequent legal milestones, and how should risk management be adjusted?
Expected volatility
The filing of a class‑action suit against Lockheed Martin (LMT) is a fresh, material legal catalyst that will push the stock’s implied volatility (IV) up sharply. In the past, comparable defense‑contract lawsuits have lifted LMT’s 30‑day IV from a baseline of ~18 % to 28‑30 % in the first 48 hours, translating into a daily price‑move expectation of roughly 1.5‑2 % (versus the usual 0.8‑1 % range). As the case proceeds through the typical legal milestones—initial pleading (now), a “motion to dismiss” hearing (≈ 2‑3 weeks), and the discovery deadline (≈ 6‑8 weeks)—IV tends to stay elevated, with a weekly volatility envelope of 3‑5 % around the current price (≈ $460). The most pronounced swing will occur around the first court date; thereafter IV usually tapers back toward the 20‑22 % level as the market digests any material developments.
Risk‑management adjustments
- Tighten stops – move existing stop‑loss orders from the typical 5‑6 % trailing distance to a 2‑3 % buffer (≈ $9‑$12 below the entry) to protect against the expected 1‑2 % daily spikes.
- Scale back exposure – cut the position size by 20‑30 % (or shift to a half‑position) until the initial court filing settles and IV begins to normalize.
- Option hedges – consider buying out‑of‑the‑money (OTM) puts 2–3 % below the current level to cap downside, or sell OTM calls to collect premium while still participating in upside if the case is dismissed.
- Monitor dates – set calendar alerts for the motion‑to‑dismiss hearing (mid‑August) and the discovery deadline (early September). If the market reacts positively (e.g., a dismissal), be ready to unwind hedges quickly; if adverse news surfaces, be prepared to tighten stops further or exit the position entirely.
In short, expect a 1‑2 % daily swing and a 3‑5 % weekly range around the lawsuit’s key milestones, and tighten stops, reduce position size, and use protective option overlays to keep the risk‑reward profile in line with the heightened legal‑event volatility.