Leonardo DRS Soars 5% on Global Defense Surge – What’s Fueling This Rally?

Summary
• Leonardo DRS (DRS) surges 5.03% to $40.795, hitting a 52-week high of $41.355
• Sector leader Lockheed Martin (LMT) mirrors momentum with 5.06% intraday gain
• Options frenzy: 20 contracts traded, with DRS20260116C41 (strike $41) seeing 1,170 turnover

Leonardo DRS is riding a global defense tailwind as U.S. and European military spending accelerates. With a 5.03% intraday jump, the stock trades near its 52-week high of $41.355, fueled by geopolitical tensions and sector-wide optimism. The Aerospace & Defense sector, led by Lockheed Martin’s 5.06% surge, is in a multi-year upcycle, with Leonardo’s U.S. military contracts and European peers like Rheinmetall (232% YTD) amplifying the momentum.

Defense Industry Tailwinds Power Leonardo DRS' 5% Surge
Leonardo DRS’ 5.03% rally is driven by a confluence of global defense spending acceleration and sector-specific catalysts. The U.S. military’s $1 trillion annual budget and Germany’s €650 billion five-year defense pledge are fueling demand for Leonardo’s submarine systems, F-35 components, and night-vision tech. Meanwhile, European peers like Rheinmetall (up 232% YTD) are outpacing Leonardo’s 10.8% annual gain, but the broader sector’s 51.5% surge in 2025 underscores a structural shift. Leonardo’s 5% revenue CAGR and 14% EPS growth over five years position it as a beneficiary of U.S. and allied military modernization, while its 46.2x dynamic P/E reflects investor optimism about sustained contract wins.

Aerospace & Defense Sector Rally: Leonardo DRS Trails Sector Leader Lockheed Martin
The Aerospace & Defense sector is in a multi-year upcycle, with Lockheed Martin (LMT) surging 5.06% alongside Leonardo DRS. LMT’s dominance in F-35 production and hypersonic tech aligns with global modernization budgets, while Leonardo’s focus on U.S. military equipment (e.g., Virginia-class subs, Apache helicopters) positions it for steady growth. However, European peers like Rheinmetall are outpacing both, leveraging Germany’s €650 billion defense pledge. Leonardo’s 5% revenue CAGR pales against Rheinmetall’s 30% CAGR since 2023, but its U.S. market exposure and diversified portfolio offer resilience amid regional volatility.

Options Playbook: High-Leverage Calls on Leonardo DRS
• MACD: 0.676 (bullish), Signal Line: 0.091, Histogram: 0.585 (momentum)
• RSI: 88.45 (overbought), 200-day MA: $39.97 (below current price)
• Bollinger Bands: Upper $37.99 (below price), Middle $34.76 (far below)

Leonardo DRS is in a short-term bullish trend, with RSI near overbought territory and MACD divergence suggesting momentum. Key levels to watch: 200-day MA at $39.97 (support) and 52-week high at $41.355 (resistance). The stock’s 88.45 RSI and 0.585 MACD histogram indicate strong near-term buying pressure, but overbought conditions may trigger a pullback. For aggressive bulls, the DRS20260116C41 and DRS20260116C42 call options offer high leverage and liquidity.

• DRS20260116C41 (strike $41, expiration 2026-01-16):
- IV: 39.50% (moderate), Leverage: 45.40%
- Delta: 0.493 (moderate sensitivity), Theta: -0.137 (high time decay)
- Gamma: 0.1669 (high sensitivity to price moves), Turnover: 1,170
- Payoff (5% upside): $1.175 per contract (41.355 - 41 = 0.355 gain)
- This contract balances leverage and liquidity, ideal for a 5% upside scenario.
• DRS20260116C42 (strike $42, expiration 2026-01-16):
- IV: 43.52% (moderate), Leverage: 68.10%
- Delta: 0.3505 (moderate sensitivity), Theta: -0.116 (high time decay)
- Gamma: 0.1408 (high sensitivity), Turnover: 905
- Payoff (5% upside): $0.875 per contract (41.355 - 42 = -0.645, but intrinsic value = 0.355)
- Offers higher leverage but lower delta, suitable for a breakout above $42.

Aggressive bulls: Buy DRS20260116C41 if $41.49 holds.

Backtest Leonardo DRS Stock Performance
The performance of DRS following a 5% intraday increase from 2022 to the present has been generally positive, with varying short-term win rates and returns. Here's a detailed analysis:1. Frequency and Win Rates: The 5% intraday change event has occurred 421 times over the period. The 3-day win rate is 52.73%, the 10-day win rate is 60.57%, and the 30-day win rate is 66.75%. This indicates a higher probability of positive returns in the short term, with the win rate increasing as the time horizon expands.2. Returns: The average 3-day return following the event is 0.50%, the 10-day return is 1.60%, and the 30-day return is 4.75%. This suggests that while the immediate post-event returns are modest, there is still a positive trend in the returns as the time horizon extends.3. Maximum Return: The maximum return observed following the event is 9.46%, which occurred on day 59. This highlights the potential for significant gains if held for an extended period, although this is not a typical outcome as the average returns are lower.In conclusion, while the immediate post-event returns are modest, DRS has shown a tendency for positive returns in the short term, and the win rates increase as the time horizon expands. The maximum return observed suggests that there is potential for significant gains if held for an extended period, although this is not a typical outcome based on the average returns.

Act Now: Leonardo DRS at Pivotal Moment – Watch for Breakout
Leonardo DRS’ 5.03% surge reflects its position in a global defense upcycle, but sustainability hinges on maintaining its 5% revenue CAGR and securing U.S. military contracts. Key levels to monitor: 200-day MA at $39.97 (support) and 52-week high at $41.355 (resistance). The sector leader, Lockheed Martin (LMT), is up 5.06% today, signaling broad-based optimism. Investors should prioritize DRS20260116C41 for a breakout above $41.49 or DRS20260116C42 for a $42.00 test. Buy DRS20260116C41 if $41.49 holds.