Aerovironment Plummets 4.8% Amid Sector Turbulence: What’s Fueling the Selloff?

Summary
• Aerovironment (AVAV) trades at $247.1, down 4.8% from its $259.61 open
• Intraday range spans $243.22 to $264.25, signaling sharp volatility
• Sector news highlights Ukraine-Russia drone warfare and U.S. defense spending shifts
• Options chain shows surging put activity, with AVAV20250815P235 seeing 198.89% price change

Aerovironment’s 4.8% intraday plunge has ignited urgency among traders, with the stock trading near its session low of $243.22. The move coincides with a surge in bearish options activity and a broader sector narrative of geopolitical tension and defense procurement shifts. As the stock tests key support levels, the interplay between technical indicators and sector-driven sentiment will define its near-term trajectory.

Geopolitical Tensions and Defense Procurement Shifts Spark AVAV’s Downturn
Aerovironment’s sharp decline stems from a confluence of sector-specific pressures and macroeconomic anxieties. Recent news of Russia’s intensified Shahed drone attacks and U.S. aid proposals to Ukraine have shifted defense spending priorities toward immediate counter-drone solutions, sidelining AVAV’s niche loitering munition expertise. Meanwhile, Lockheed Martin’s (LMT) -1.23% intraday drop—driven by production delays in Patriot interceptors—has cast a shadow over the sector. AVAV’s elevated dynamic PE ratio (279.52) and weak RSI (36.69) suggest overvaluation and bearish momentum, compounding investor caution.

Aerospace & Defense Sector Mixed as AVAV Trails LMT’s Decline
The Aerospace & Defense sector remains fragmented, with Lockheed Martin’s -1.23% drag offset by solid demand for counter-drone systems and hypersonic weapons. AVAV’s underperformance reflects its exposure to niche markets, contrasting with broader sector players like Raytheon (RTX), which recently secured a $10.8B AIM-120 AMRAAM contract. While AVAV’s 52W high of $295.9 remains intact, its current price near 200D MA ($182.78) highlights structural weakness against sector peers capitalizing on near-term defense spending.

Bearish Options Playbook: AVAV20250815P235 and AVAV20250815P230 Lead the Charge
• 200-day average: $182.78 (far below) • RSI: 36.69 (oversold) • MACD: 7.68 (bearish divergence) • Bollinger Bands: $257.82 (lower band) • Gamma: 0.013–0.019 (high sensitivity) • IV: 39.61%–51.34% (elevated)

AVAV’s technicals signal a high-probability continuation of its bearish trend, with key support at $243.22 and resistance at $267.78. The options chain offers two compelling plays: AVAV20250815P235 (strike $235, 50.66% IV, 91.81% leverage) and AVAV20250815P230 (strike $230, 51.34% IV, 148.78% leverage). Both contracts exhibit high gamma (0.0167–0.0131) and theta (-0.033–0.067), ensuring rapid payoff in a 5% downside scenario (projected price: $234.75).

AVAV20250815P235: • IV: 50.66% (mid-range volatility) • Leverage: 91.81% (aggressive payoff) • Delta: -0.238 (moderate sensitivity) • Turnover: $1,952 (liquid) • Gamma: 0.0167 (price-sensitive) • Theta: -0.033 (time decay) • Payoff: $15.25 (max gain at $235).
AVAV20250815P230: • IV: 51.34% (elevated volatility) • Leverage: 148.78% (high reward) • Delta: -0.162 (lower sensitivity) • Turnover: $1,798 (liquid) • Gamma: 0.0131 (price-sensitive) • Theta: -0.067 (rapid decay) • Payoff: $17.10 (max gain at $230).

These puts capitalize on AVAV’s weak technicals and sector headwinds. Aggressive bears may target the $230 level, while conservative traders should monitor the 200D MA ($182.78) as a critical floor.

Backtest Aerovironment Stock Performance
The stock AVAV has experienced a -5% intraday plunge, and we've backtested its performance following this event. Over a 3-day period, the win rate is 55.30%, with an average return of 0.56%. Over a 10-day period, the win rate increases to 57.12%, with an average return of 1.36%. Finally, over a 30-day period, the win rate reaches 58.94%, with an average return of 5.03%. These results suggest that AVAV tends to recover from significant intraday drops, although the maximum return during the backtest period was only 9.93%, indicating some limitations in the short-term gains.

AVAV’s Bearish Crossroads: Act on Key Levels or Risk Further Downturn
Aerovironment’s 4.8% drop underscores a critical juncture for the stock, with its 52W low ($102.25) and 200D MA ($182.78) looming as existential threats. The sector’s focus on counter-drone systems and hypersonic weapons—exacerbated by LMT’s -1.23% drag—suggests AVAV’s niche positioning may struggle to regain traction. Traders should prioritize the AVAV20250815P235 and AVAV20250815P230 options for short-term bearish exposure, while watching the $243.22 intraday low as a near-term support. If the $230 level breaks, AVAV’s technicals could spiral toward multi-year lows. Act now: Secure puts before the 8/15 expiry or pivot to cash if $267.78 resistance holds.