AVAV Plunges 6.5% Amid Sector Volatility: What's Fueling the Selloff?

Summary
• Aerovironment (AVAV) trades at $281.88, down 6.5% from its $301.52 previous close
• Intraday range spans $278.10 to $293.13, reflecting sharp volatility
• 52-week high of $307.11 now 7.3% above current price
• Options chain shows AVAV20251003P280 (put) and AVAV20251003P275 (put) as top traded contracts

AVAV’s intraday selloff has captured market attention as the stock collapses nearly 6.5% in a single session. With the aerospace sector showing mixed signals and no immediate catalysts from company-specific news, traders are scrambling to decipher whether this is a short-term correction or a deeper shift in sentiment. The stock’s sharp decline has triggered heavy put option activity, while technical indicators suggest overbought conditions may be unwinding.

Profit-Taking and Overbought Conditions Trigger Sharp Correction
The 6.5% intraday drop in AVAV appears driven by a combination of profit-taking after recent gains and a correction from overbought technical conditions. The stock’s RSI of 84.54 indicates extreme overbought territory, often preceding pullbacks. While no direct company-specific news triggered the move, the absence of bullish catalysts in recent weeks—despite a string of defense contracts and analyst upgrades—has left the stock vulnerable to broader market rotation. Additionally, the 52-week high of $307.11 now acts as a psychological resistance level, with the current price 7.3% below that threshold.

Options Playbook: Capitalizing on Volatility with Put Options
• 200-day MA: $189.56 (well below current price)
• RSI: 84.54 (overbought, suggesting potential reversal)
• Bollinger Bands: Price at $281.88, 13.5% below upper band of $302.74
• MACD: 12.56 (bullish) vs. signal line 5.94, but histogram contraction indicates weakening momentum

Key levels to monitor include the 30D support range of $245.69–$247.20 and the 200D support of $161.02–$164.81. The stock’s short-term technical profile suggests a high probability of continued weakness, with the RSI and MACD divergence pointing to a potential breakdown. While no leveraged ETF data is available, the options chain offers compelling short-term plays.

Top Put Option 1: AVAV20251003P280
• Contract Code: AVAV20251003P280
• Type: Put
• Strike Price: $280
• Expiration: 2025-10-03
• IV: 67.98% (high but reasonable)
• LVR: 31.63% (moderate leverage)
• Delta: -0.3934 (moderate sensitivity)
• Theta: -0.0906 (moderate time decay)
• Gamma: 0.0126 (modest price sensitivity)
• Turnover: $13,790 (high liquidity)
• Payoff at 5% downside ($267.83): $12.17 per contract
This put option offers a balance of leverage and liquidity, with a 5% downside scenario yielding a 38% return on the premium. The moderate delta and gamma suggest it will respond well to continued price erosion without excessive time decay.

Top Put Option 2: AVAV20251003P275
• Contract Code: AVAV20251003P275
• Type: Put
• Strike Price: $275
• Expiration: 2025-10-03
• IV: 46.78% (reasonable)
• LVR: 77.37% (high leverage)
• Delta: -0.2751 (moderate sensitivity)
• Theta: -0.0087 (low time decay)
• Gamma: 0.0159 (strong price sensitivity)
• Turnover: $2,030 (adequate liquidity)
• Payoff at 5% downside ($267.83): $7.17 per contract
This option’s high leverage ratio and strong gamma make it ideal for a sharp decline, while the low theta minimizes decay risk. A 5% move down would yield a 350% return on the premium, though liquidity is lower than the first option.

If AVAV breaks below $278.10 (intraday low), the AVAV20251003P280 put offers a high-probability short-side trade. Aggressive bears may consider the AVAV20251003P275 put for amplified exposure if the selloff accelerates.

Backtest Aerovironment Stock Performance
Below is an interactive event-backtest panel that summarizes how AVAV behaved after every ≥ 7 % intraday plunge since 2022.Key take-aways1. Sample size: 15 qualifying plunge days were identified.2. 1- to 30-day median returns after these events remained slightly negative and statistically insignificant versus the stock’s unconditional performance.3. Win-rate hovered around 40-50 %, offering no clear edge.4. The pattern does not appear exploitable as a standalone long signal; pairing with broader market filters or position-sizing rules is advisable.Auto-assumptions made• Analysis window: 30 trading days after each event (default engine setting). • Price source: official daily OHLC data (open, high, low, close). • Dates span 2022-01-03 to 2025-09-24, covering all available sessions in the period.

Act Now: Position for a Potential Breakdown Below $278.10
The 6.5% intraday selloff in AVAV reflects a correction from overbought conditions and profit-taking, with technical indicators strongly favoring a continuation of the decline. Key levels to watch include the 30D support range and the 200D support, with the latter acting as a critical floor. The sector leader, Lockheed Martin (LMT), is up 0.17%, suggesting AVAV’s move is stock-specific rather than sector-driven. Traders should prioritize the AVAV20251003P280 put for a measured short position or the AVAV20251003P275 put for aggressive downside exposure. Watch for a breakdown below $278.10 to confirm the bearish case.