What are the implications for options positions and hedging strategies related to LMT?

Options‑Market Impact

The class‑action filing against Lockheed Martin (LMT) is a negative‑sentiment catalyst (‑70 sentiment) that will likely trigger a short‑term sell‑off as investors with exposure to the alleged “large losses” scramble to protect capital. In the options market this translates into a sharp rise in implied volatility (IV) for near‑term strikes (e.g., March‑April 2025 expirations) as market makers price in the heightened probability of a downside move. The IV skew will steepen on the put side, especially for out‑of‑the‑money (OTM) puts that are cheap relative to the new risk premium.

Hedging Strategies

1. Long‑Put Protection – For traders holding long LMT equity or delta‑positive option positions (e.g., long calls), buying OTM puts 1–2 % below the current price (≈$460–$470) with 1–2 month expirations can lock in downside protection while still allowing upside participation. The cost is modest because the put premium is still relatively low before the IV surge fully embeds.

2. Put‑Write/Delta‑Neutral – If you are net‑short LMT (e.g., from a short‑equity or short‑call position), consider selling near‑the‑money (NTM) puts to collect premium while staying delta‑neutral. The elevated IV makes put‑writes attractive, but be prepared to roll the position quickly if the stock breaks below the strike.

3. Calendar or Ratio Spreads – A long‑calendar spread (long front‑month OTM put, short back‑month OTM put) captures the expected IV expansion while limiting directional exposure. Alternatively, a ratio‑call spread (2 × long OTM call, 1 × short ATM call) can profit from a modest upside bounce if the market over‑reacts to the news, while capping upside risk.

Actionable Take‑Away

• Monitor IV: Expect a 15‑25 % IV jump for the next 30‑45 days. Adjust strike selection accordingly—favor OTM puts for protection and NTM or slightly ITM calls for directional bets.
  
• Position Size: Keep option exposure limited to 5‑10 % of total portfolio capital until the lawsuit’s legal‑process timeline clarifies the magnitude of any potential settlement or disclosure impact.
  
• Watch the price: If LMT breaks below $460 on volume, consider tightening protective puts or converting to a protective collar (long put + short call) to lock in a floor while capping upside.
  

Overall, the class‑action news creates a volatility‑driven environment where the primary driver is risk management rather than directional conviction. Use the IV uplift to price protective puts, collect premium on put‑writes, or construct spreads that profit from the expected volatility expansion while preserving flexibility to roll as the legal narrative evolves.