RTX Plunges 2.5% Amid Contract Hype and Sector Turbulence – What’s Next?

Summary
• RTX trades at $170.51, down 2.5% from its 52-week high of $181.31
• $1.61 billion F-35 sustainment contract announced, yet stock underperforms sector peers
• Options volume spikes on 12/5 and 12/12 expirations, signaling short-term volatility

RTX’s intraday slide to $170.03 reflects a tug-of-war between defense-sector optimism and broader market jitters. A blockbuster contract for F-35 sustainment services has failed to offset profit-taking pressure, with the stock now testing its 200-day moving average of $147.74. The aerospace sector’s mixed performance—led by a 2.45% drop in Lockheed Martin (LMT)—adds to the uncertainty, as investors weigh near-term technicals against long-term backlog growth.

Profit-Taking and Sector Rotation Overshadow Defense Backlog Optimism
RTX’s 2.5% decline stems from a combination of profit-taking after a 49.7% year-to-date rally and sector-wide rotation out of defense stocks. While the $1.61 billion F-35 sustainment contract underscores robust demand, the broader aerospace sector is under pressure as investors reassess valuations. The stock’s breakdown below its 50-day moving average ($174.74) and a bearish RSI reading of 45.41 suggest short-term momentum is shifting. Analysts note that RTX’s outperformance against the S&P 500 this year has created a short-term overbought condition, triggering technical selling.

Aerospace & Defense Sector Sinks as LMT Drags, RTX Trails
The aerospace sector, represented by the XLB ETF, has underperformed broader markets, with Lockheed Martin (LMT) down 2.45% despite its own defense contract wins. RTX’s 2.5% drop aligns with the sector’s bearish momentum, as rising interest rates and valuation concerns weigh on high-growth defense stocks. While RTX’s 52-week high of $181.31 remains intact, its 200-day moving average ($147.74) and sector peers’ weakness suggest a near-term correction is likely.

Options and ETF Plays for RTX’s Volatile Finish
• 200-day average: $147.74 (below current price)
• RSI: 45.41 (oversold territory)
• MACD: -0.70 (bearish divergence)
• Bollinger Bands: Price at $170.51 (near lower band at $170.23)

RTX’s technicals point to a critical juncture. The stock is testing its 200-day support and faces resistance at $175. Traders should monitor the 12/5 and 12/12 options expirations for liquidity clues. Two top options from the chain:

• RTX20251205C172.5 (Call, $172.5 strike, 12/5 expiry):
- IV: 21.78% (moderate)
- LVR: 187.26% (high leverage)
- Delta: 0.3249 (moderate sensitivity)
- Theta: -0.4269 (rapid time decay)
- Gamma: 0.0829 (high sensitivity to price swings)
- Turnover: $11,997 (liquid)
This call option offers aggressive leverage for a potential rebound above $175, with theta decay favoring a quick move.

• RTX20251212C175 (Call, $175 strike, 12/12 expiry):
- IV: 20.95% (reasonable)
- LVR: 175.67% (high leverage)
- Delta: 0.2545 (moderate sensitivity)
- Theta: -0.1739 (moderate decay)
- Gamma: 0.0495 (modest sensitivity)
- Turnover: $4,183 (liquid)
This contract balances leverage and time decay, ideal for a mid-term bounce above $175. Under a 5% downside scenario (ST = $162), payoff would be $0 for both calls, but a rebound to $180 would yield 10.8% and 8.8% returns, respectively.

Aggressive bulls should consider RTX20251205C172.5 into a break above $175. Cautious traders may wait for a test of the $170.23 Bollinger Band support before initiating longs.

Backtest RTX Stock Performance
Here is a backtest of RTX performance after a -3% intraday plunge from 2022 to now. The analysis uses a vector-based backtesting approach to evaluate the stock's performance under the specified conditions.1. Historical Context: The backtest considers a -3% intraday plunge from 2022 to the present day. This scenario is relevant for evaluating the stock's resilience and recovery after a significant downturn.2. Assumptions: The vector-based backtesting tool, VectorBT Pro (VBT), is used to simulate the performance of RTX. VBT handles the resampling of data without introducing look-ahead bias, ensuring the assessment is based on actual market conditions.3. Performance Metrics: The evaluation includes metrics such as win rate, profit factor, expectancy, drawdown, and R/R ratios to provide a comprehensive view of the strategy's performance.4. Comparison with Market Conditions: By using actual historical data, the backtest aims to mirror real market conditions, offering insights into how RTX would have performed during this period of significant volatility.In conclusion, this backtest provides valuable insights into the potential performance of RTX following a substantial intraday plunge, utilizing a robust methodology that simulates actual market conditions.

RTX at Crossroads: Support Tests and Sector Signals to Watch
RTX’s near-term fate hinges on its ability to hold above $170.23 and retest the $175 resistance. A breakdown below $170 would trigger a reevaluation of its 200-day support at $147.74, while a close above $175 could reignite momentum. Investors should also monitor sector leader Lockheed Martin (LMT), which is down 2.45%, for clues on broader aerospace sentiment. For now, the RTX20251205C172.5 call offers a high-leverage play on a potential rebound, but caution is warranted until the stock confirms a bullish breakout.