General Dynamics Surges 2.95% Amid Trump's $1.5T Defense Push and Buyback Ban – What’s Next?

Summary
• General Dynamics (GD) rockets 2.95% to $355.85, hitting a 52-week high of $367.655
• President Trump’s $1.5 trillion defense budget proposal and executive order banning defense company dividends/buybacks drive frenzy
• GD’s 52-week range of $239.2–$367.655 highlights volatility amid geopolitical tensions

General Dynamics is surging on a historic policy shift as President Trump’s $1.5 trillion defense budget proposal and executive order banning dividends/buybacks for defense firms ignite sector-wide optimism. With GD trading near its 52-week high and a record $112 billion backlog, investors are recalibrating risk-reward profiles in a market primed for defense-sector outperformance.

Trump’s $1.5T Defense Budget and Buyback Ban Ignite GD’s Surge
President Trump’s dual announcements—a $1.5 trillion defense budget and a ban on dividends/buybacks for defense contractors—have catalyzed General Dynamics’ 2.95% intraday rally. The budget, aimed at modernizing the U.S. military, directly benefits GD’s Marine Systems and Combat Systems segments, which dominate submarine and tank production. Meanwhile, the executive order forces companies like GD to reinvest capital into production rather than shareholder returns, aligning with Trump’s focus on 'exponential military readiness.' This policy pivot has triggered a re-rating of defense stocks, with GD’s 52-week high of $367.655 reflecting its critical role in the 'Dream Military' vision.

Defense Sector Rally Led by LMT as Trump’s Policies Drive GD and Peers Higher
The defense sector is surging in lockstep with Trump’s policy announcements. Lockheed Martin (LMT), the sector’s bellwether, has jumped 5.02% on the same day, outpacing GD’s 2.95% gain. This reflects LMT’s dominance in next-gen fighter jets and missile systems, which are central to the $1.5 trillion budget. However, GD’s Marine Systems segment—responsible for nuclear submarines—positions it as a long-term beneficiary of the 'Nuclear Triad' modernization, giving it a unique edge over peers like Northrop Grumman (NOC) and BAE Systems (BA). The sector’s synchronized rally underscores the market’s conviction in sustained defense spending.

Options and ETF Strategies for GD’s Volatile Rally – Top Picks and Technicals
• MACD: 2.55 (bullish divergence), RSI: 56.72 (neutral), 200D MA: 310.41 (well below current price)
• Bollinger Bands: GD trading near upper band at $355.02, signaling overbought conditions
• Key Levels: 342.5 (support), 367.655 (resistance), 329.51 (lower band)

General Dynamics’ technicals suggest a continuation of its bullish momentum, with the 200-day moving average acting as a strong floor. The RSI hovering near 56.72 indicates no immediate overbought pressure, while the MACD’s positive divergence reinforces the trend. For options traders, the GD20260116C370 and GD20260116C365 contracts stand out:

• GD20260116C370 (Call, $370 strike, 1/16/2026):
- IV: 22.22% (moderate), Leverage Ratio: 404.48% (high), Delta: 0.141 (low), Theta: -0.287 (high decay), Gamma: 0.018 (moderate), Turnover: 343,711 (liquid)
- This contract offers explosive upside if GD breaks above $370, with leverage amplifying gains. However, its low delta means it’s sensitive to volatility rather than directional moves.
- Payoff (5% upside): $12.38/share (355.85 → 373.64 → max(0, 373.64 - 370) = 3.64)

• GD20260116C365 (Call, $365 strike, 1/16/2026):
- IV: 22.86% (moderate), Leverage Ratio: 187.34% (high), Delta: 0.253 (moderate), Theta: -0.463 (high decay), Gamma: 0.025 (high), Turnover: 47,333 (liquid)
- This contract balances leverage and liquidity, ideal for a continuation of GD’s rally. Its higher delta ensures participation in price gains, while the 22.86% IV reflects market anticipation of further volatility.
- Payoff (5% upside): $8.64/share (355.85 → 373.64 → max(0, 373.64 - 365) = 8.64)

Aggressive bulls should consider GD20260116C365 into a break above $367.655, while GD20260116C370 offers high-risk, high-reward potential if the stock gaps higher.

Backtest General Dynamics Stock Performance
The backtest of GD's performance after a 3% intraday surge from 2022 to the present shows promising results. The 3-day win rate is 100%, the 10-day win rate is also 100%, and the 30-day win rate is 100%, indicating that GD consistently performs well in the short term following the surge. The maximum return during the backtest period was 14.51%, which occurred on day 57, suggesting that GD can generate significant gains in the aftermath of the intraday surge.

GD’s Rally Faces Key Levels – Act Now as Sector Leaders Signal Strong Momentum
General Dynamics’ 2.95% surge is a microcosm of the defense sector’s re-rating under Trump’s $1.5 trillion budget and buyback ban. With GD trading near its 52-week high and a $112 billion backlog, the stock is positioned to benefit from sustained spending on submarines and armored vehicles. However, investors must watch the 367.655 resistance level and the 342.5 support zone. The sector’s momentum is further reinforced by Lockheed Martin’s 5.02% gain, signaling broad-based confidence. For options traders, the GD20260116C365 and GD20260116C370 contracts offer compelling leverage if the rally continues. Act now before the 1/16 expiration date to capitalize on this policy-driven surge.