Seasonality suggests for Lockheed Martin that over the past 10 years, the stock's dips are bought into January. So let's investigate a covered call in Lockheed Martin stock.
With the average fade near 6%, a covered-call spread lets the trader collect premium in a way that allows for the potential choppy action.
Lockheed Martin Stock: Trade Structure
When we take a position into a pullback like the one Lockheed Martin stock just experienced, we are interested in a measured-risk approach. Therefore, selling the call option allows the trader to hold the stock at a discount. And if Lockheed Martin stock continues to rise, the call option can be covered; the trader opens a new option against the stock. We call this "rolling the strike."
Why do this? We continue to both hold the stock and collect more revenue as time passes and Lockheed Martin stock continues to climb. If the stock fades, we have a solid cushion of profit that the short call provides.
Compose the trade this way:
- Buy 100 shares of Lockheed Martin, which recently traded near 422.29.
- Sell to open 1 Jan. 16, 2026-expiring 440 call, recently priced at $20.50.
Calculate the break-even prices of Lockheed stock at expiration on this trade by subtracting the credit received against the cost of the stock. We get $42,229 - $2,050 = $40,179, less commissions. This implies the actual cost of each share would be reduced to 401.79 per share, a 9% discount.
Trade Management
The chart shows a resistance zone around 440, while support sits near 400.
As for possible ways to leave the trade, first consider holding the stock and the option until expiration of January 2026. If the stock trades above 440, the trader will relinquish the stock at 440 and collect the difference between the actual cost of the shares and the $440 strike price. We get $440 - $401.79 = $38.21 less commissions, or 9% return for a four-month hold.
Second, set an alert for $401, the break-even price. Sell the entire position if your risk thresholds are breached.
The bullish trader might say, "Shouldn't I sell the call much further out of the money if I am bullish on the stock?" Yes, but if the market has any retracements of importance, selling the strike at the money provides a tidy cushion of support while still keeping the stock for potential upside.
That said, if the trader is highly bullish, consider selling higher strike prices near $450 to $460.
Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades, Sirius Business Radio, Investors Business Daily, the Benzinga Pro platform as well as Topstep on YouTube
