RTX is oversold and positioned for a pre-earnings rebound.

larger backlog of orders for defense contractors such as Raytheon, Boeing, Lockheed, and Northrop, which leads to increased production, and therefore increased revenue and free cash flow for these companies.

I looked at RTX, which is still having a good year with a gain of about 10%, but we saw it fall by about 5% this week, and 10% overall from its recent all-time highs . So I looked at something upward.

Implied volatility levels are low, and the technically-based Relative Strength Index is reaching the low thirties, possibly indicating an oversold situation at this point.

So, if you believe the stock will rebound before the earnings announcement on October 20, this strategy takes advantage of that. This is in the monthly October options for October 16th .

So, 42 days until the due date. It expires immediately before the earnings announcement. So, you're eliminating the risks of that event, right? But you might benefit from moving up before the report.

With the stock trading at around $200 per share here, I considered buying a call option at $200 for October and then selling the call option at $220 for it . So, a bullish vertical call option trade in the $20 range .

You pay a cost of approximately $6. This is your risk. $600 with the potential to earn around $1400 if the price rises above 220 during the next month and a half . Now, this raises your breakeven point to 206.

How far is that from the current stock price ? It is only 2.5% higher than the current share price. So, you don't need a large movement in terms of percentage.

Implied volatility levels have decreased slightly , allowing you to buy this bullish vertical option at a lower price than you would have paid if the volatility had been higher, and giving you flexibility in managing the trade .

You don't have to wait 42 days for this deal to make a profit. If the movement starts to return above 206 to reach 210 or 215, the price of this option will start to rise. That gives you the flexibility to close the deal ahead of schedule,