Boeing and the Jets: how to play the stock after the victory of his contract with Big Air Force

There is very little time left for the rest of the fiscal year of the federal government. For most people who have served in the armed forces, we know that this period can be difficult. Until new funds appear, no money for training. No money for ammunition. No money for many things service members need to do their job well.

Once in a blue moon, someone ends up with a surplus, and it is necessary to spend it before the time runs out. Enter the US Air Force and its need for a fleet of new training jets to replace the aging T-38 jets previously manufactured by Northrop Grumman (NOC) .

Envelope, please!

As I had already discussed with Real money Readers, actors here were Boeing (BA), who had partnered with Saab against Lockheed Martin (LMT), who had partnered with Korea Aerospace Industries to produce the T-50 already used in South Korea.

Since Lockheed Martin already had a trainer on whom to support and could deliver a new generation model by 2022, I thought the LMT was the favorite. I was wrong. Not financially. I am two names long, but it is not where I thought the air force would go on this subject.

The US Air Force chose the Boeing model last night. The contract involves the purchase of 351 aircraft worth up to $ 9.2 billion. It had already been reported that this deal could be worth $ 16 billion. The agreement is so huge, but far below what we had hoped for on the supply side.

The Boeing offer is more technological than the Lockheed Martin aircraft. An offer "from scratch", I'm actually surprised to see that this delivery, like that of the LMT, could arrive as early as 2022. What probably attracted the brass of the Air Force, it's the versatility of the aircraft. At least on paper, the cockpit of the Boeing aircraft can mimic either an F-22 fighter or an F-35 fighter for the coach driver.

New budget

In the future, I am confident that you have noticed the magnitude of the Defense Credits Measure for the 2019 fiscal year ($ 674 billion) passed by lawmakers this week.

Those of you who follow the defense will begin to hear the word "hypersonic". It is there that high-tech weapons will develop. It's almost indefensible. According to J.P. Morgan analysts' estimates this week, spending in this space is expected to reach $ 5 billion over the next few years, or "maybe a lot more."

Players will again be Lockheed Martin, Boeing, Raytheon's Action Alerts PLUS (RTN), Northrop Grumman and could even include Kratos Defense & Security Solutions (KTOS) and Aerojet Rocketdyne Holdings (AJRD).

Ideas for exchange

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We can quickly see on the graph above that Boeing has flat lines at the top all year, but every time the stock sells, they find support at a higher level than the last time. When a formation like this closes, there can often be a violent movement. Does the resistance crack on this attempt? Would you bet against Boeing in this environment?

Novice: Wait for a break above the $ 370 level and a successful test from the previous level for the entry of a long position on stocks.

Slightly advanced: Purchase a BA 370 call on October 26 (default: $ 10.18), sell (write) a BA 385 October 26 call (default value: $ 4.38). Basically, the trader risks $ 5.80 for a potential net profit of up to $ 9.20.