Huntington Ingalls Soars 6.3% on Trump's $1.5T Defense Budget Proposal – Is This the Start of a New Bull Run?

Summary
• HII surges 6.33% to $379.04, hitting a 52-week high of $389.52
• Trump's proposed $1.5T 2027 defense budget sparks sector-wide rally
• Melius Research upgrades HII with higher FY2026-2028 EPS forecasts
• Ingalls Shipbuilding secures $1.5B Navy contract for new combatant ships

Huntington Ingalls (HII) is trading at a record high amid a seismic shift in defense spending. The stock’s 6.3% intraday surge reflects optimism over Trump’s $1.5 trillion military budget proposal, which could unlock billions in new contracts. With the defense sector rallying and analysts upgrading targets, investors are weighing whether this is a sustainable breakout or a short-term spike.

Trump’s $1.5T Budget Proposal Ignites Defense Sector Optimism
Huntington Ingalls’ 6.3% surge is directly tied to President Trump’s proposal to increase the U.S. military budget to $1.5 trillion for 2027—a 50% jump from 2025 levels. This move has triggered a broad rally across defense contractors, with HII benefiting from its role in naval shipbuilding and recent contract wins. The Ingalls Shipbuilding division’s $1.5B Navy contract for new combatant ships, combined with Melius Research’s upgraded EPS forecasts, has amplified investor confidence. The stock’s gap-up open from $356.45 to $380.00 and subsequent climb to $389.52 reflect immediate demand for exposure to defense spending tailwinds.

Defense Sector Rally as Trump’s Budget Boosts HII and Peers
The aerospace and defense sector is experiencing a synchronized rally, with HII leading the charge. Peers like Lockheed Martin (LMT, +4.19%) and Northrop Grumman (NOC, +2.34%) are also up sharply, driven by the same budget proposal. HII’s 6.3% gain outpaces the sector’s average, reflecting its strong backlog ($57B) and recent AI-related tailwinds. The sector’s collective response underscores the market’s belief that increased defense spending will directly boost contract flow and margins for shipbuilders and defense tech firms.

Options Playbook: Leveraging HII’s Bullish Momentum with Gamma-Driven Calls
• 200-day MA: $267.14 (well below current price)
• RSI: 65.82 (neutral to overbought)
• MACD: 11.60 (bullish divergence)
• Bollinger Bands: Price at $379.04 (above upper band of $371.79)

HII’s technicals suggest a continuation of its bullish trend. The stock is trading above its 200-day MA by 40%, with RSI near overbought territory and MACD showing positive momentum. The upper Bollinger Band at $371.79 has been breached, indicating strong upside potential. For aggressive traders, the HII20260116C380 and HII20260116C390 call options offer high leverage and gamma sensitivity to further price gains.

• HII20260116C380
- Type: Call
- Strike: $380
- Expiry: 2026-01-16
- IV: 25.75% (moderate)
- Leverage: 66.47%
- Delta: 0.4857 (moderate sensitivity)
- Theta: -0.8526 (high time decay)
- Gamma: 0.0260 (high sensitivity to price moves)
- Turnover: 42,299
- Payoff at 5% upside ($398.04): $18.04/share
- This contract offers a balance of leverage and gamma, ideal for a 5-7% price move. The high gamma ensures rapid delta expansion if HII breaks above $380, amplifying gains.

• HII20260116C390
- Type: Call
- Strike: $390
- Expiry: 2026-0116
- IV: 28.72% (moderate)
- Leverage: 135.32%
- Delta: 0.2730 (low sensitivity)
- Theta: -0.6059 (moderate time decay)
- Gamma: 0.0195 (moderate sensitivity)
- Turnover: 39,835
- Payoff at 5% upside ($398.04): $8.04/share
- The 390 call provides explosive leverage (135%) for a smaller delta, making it ideal for a sharp breakout above $390. High IV and leverage amplify returns if the stock gaps higher.

Action Alert: Aggressive bulls should target HII20260116C380 into a break above $380. If the stock closes above $390 by expiry, HII20260116C390 could deliver 10x+ returns.

Backtest Huntington Ingalls Stock Performance
The backtest of the performance of HII following a 6% intraday increase from 2022 to the present shows a strategy return of 34.12%, with a benchmark return of 42.97% and an excess return of -8.86%. The strategy has a CAGR of 7.77% and a maximum drawdown of 0.00%, indicating a stable but conservative performance during the backtested period.

HII’s Breakout: A New Era for Defense Stocks?
Huntington Ingalls’ 6.3% surge signals a potential inflection point for defense stocks, driven by Trump’s budget proposal and a $57B backlog. The stock’s technicals and options activity suggest continued momentum, with key resistance at $390. Sector leader Lockheed Martin (LMT) is up 4.19%, reinforcing the sector’s strength. Investors should monitor HII’s ability to hold above $380 and watch for follow-through volume. For those seeking leverage, the HII20260116C380 and C390 calls offer high-reward opportunities if the defense rally persists.