Elevated Options Volatility in Defense and Tech Stocks: A Risk-Reward Analysis and Strategic Options Positioning Guide

The current market environment has seen a surge in options volatility for defense and technology stocks, driven by macroeconomic uncertainty and sector-specific dynamics. This volatility presents both opportunities and risks for investors, particularly as earnings reports, geopolitical tensions, and regulatory shifts amplify price swings. A closer look at AeroVironment (AVAV), a defense and tech firm, alongside contrasting cases like United Airlines (UAL), Old National Bancorp (ONB), and Spectrum Brands (SPB), reveals critical insights into risk-reward trade-offs and strategic options positioning.

AVAV: A Case of Divergent Volatility and Deteriorating Fundamentals

AeroVironment (AVAV) exemplifies the tension between elevated implied volatility and weakening fundamentals. As of November 26, 2025, AVAV's implied volatility stood at 77.0, a 15.5% premium over its 20-day historical volatility of 66.7. This disconnect suggests that markets anticipate significant near-term price swings, potentially linked to upcoming earnings or broader sector trends. However, AVAV's fundamentals tell a different story: declining revenue growth and margin pressures have raised concerns about its long-term sustainability.

The mismatch between implied volatility and fundamentals creates a unique risk-reward profile. For options traders, AVAV's high IV offers opportunities to sell volatility-such as through covered calls or iron condors-if the stock stabilizes post-earnings. Conversely, long volatility strategies like straddles or strangles could backfire if the stock fails to deliver on expected catalysts.

Contrasting Volatility: UAL, ONB, and SPB

To contextualize AVAV's volatility, consider United Airlines (UAL), which reported an implied volatility of 42.92% as of November 2025, with historical volatility at 47.84%. This suggests that UAL's price action has already priced in much of its near-term uncertainty, making it a less volatile proposition compared to AVAV. For UAL, strategies that capitalize on mean reversion-such as buying puts or calls near key support/resistance levels-may be more effective.

Old National Bancorp (ONB) presents another contrast. While specific implied volatility data for November 26, 2025, is sparse, its January 16, 2026, $12.50 call option showed surging IV, hinting at anticipated earnings-driven volatility. This pattern aligns with the banking sector's sensitivity to interest rate expectations, offering opportunities for time-based strategies like calendar spreads.

Spectrum Brands (SPB) offers a cautionary tale. On November 26, 2025, SPB triggered a sell signal after hitting a pivot top, followed by a 4.09% decline. Such sharp reversals underscore the risks of relying on high IV without robust fundamental support. For SPB, defensive strategies like protective puts or short-term bearish spreads may be preferable to speculative long calls.

Strategic Options Positioning: Balancing Risk and Reward

The key to navigating elevated volatility lies in aligning strategies with both implied volatility and fundamental trajectories. For AVAV, where IV is high but fundamentals are deteriorating, selling options (e.g., cash-secured puts) could generate income if the stock consolidates. However, this approach carries the risk of gamma exposure if the stock gaps up or down on earnings.

For UAL and ONB, where implied volatility is lower relative to historical levels, buying options with longer expirations (e.g., LEAPS) may offer asymmetric payoffs if volatility spikes. In contrast, SPB's recent price action suggests a focus on short-term volatility harvesting, such as iron condors or diagonal spreads, to capitalize on expected range-bound trading.

Conclusion: Volatility as a Double-Edged Sword

Elevated options volatility in defense and tech stocks like AVAV reflects a market grappling with uncertainty. While high IV can enhance returns for sellers of volatility, it also amplifies risks for long option holders. By contrasting AVAV's divergent volatility with the more stable profiles of UAL and ONB-and the deteriorating case of SPB-investors can craft strategies that balance speculative potential with downside protection. In this environment, discipline in capital allocation and a keen eye on fundamental catalysts will separate successful traders from the casualties of volatility.