War Is Coming! Find Trading Opportunities in AI, Drones, and Defense!

Winter is going, while war is coming!!!

The Americo-Iranian war broke out on the last day of February, and the market shifted into risk-off mode on the first trading day of March!

But among the many stocks plunging in premarket trading, the defense sector stood out by moving higher. Today, let’s talk about the opportunities in defense stocks.

The broad defense sector can be divided into three sub-segments: Defense AI, drones, and traditional defense contractors.

1. Defense AI

The main name here is Palantir. In addition, it is said that Anthropic’s Claude large language model also played a key role in this conflict. However, Anthropic still represents only a small portion of Google’s business, so Google cannot really be classified as a defense stock for now. That could change in the future.

Options strategy: Since Palantir is trading at relatively low levels and has high upside beta, aggressive investors can buy calls to position for a potential multi-day / multi-week upside trend. If you are worried that the war situation may cause repeated risk-on / risk-off swings, then using short puts to build a position at lower levels may be a better approach.

2. Drones

The key name here is AVAV. Many of the drones reportedly used by the U.S. military in this conflict were produced by this company.

AVAV is also trading at relatively low levels, so its options strategy is similar to Palantir’s. However, the stock is already up 12% in premarket trading, so investors should be alert to potential profit-taking. Therefore, the most conservative approach is still selling puts (short put) near the bottom.

3. Traditional defense contractors

This category includes a group of stocks such as LMT, RTX, NOC, etc. These are HALO-type names, and they were already trading near highs before the war broke out, which suggests the market had already priced in the risk of conflict this year. They are now continuing to rally sharply in premarket trading.

Options strategy: These stocks generally have high share prices, so their options are also expensive, making trading costs relatively high. In addition, implied volatility is usually low, so they are not ideal for premium-selling strategies (short side). Investors planning to buy calls should pay attention to position diversification, and preferably use in-the-money contracts for a more prudent setup.

In addition, the defense ETF SHLD includes all of the above names and has a lower unit price, making it more suitable for options trading. One possible strategy is to buy 10–15% in-the-money long calls with 3–4 months to expiry to capture potential medium-term upside.

Finally, we should keep in mind that market volatility is currently very high, so it is not wise to buy indiscriminately without considering cost and position sizing—turning your portfolio into a “supermarket.”

In periods of sharp volatility, that can create enormous psychological pressure and force you to cut positions that might otherwise have ended up as winners.

$SPDR S&P 500 ETF (SPY.US)$ $Invesco QQQ Trust (QQQ.US)$ $Palantir (PLTR.US)$ $AeroVironment (AVAV.US)$ $GLOBAL X DEFENSE TECH ETF (SHLD.US)$ $Lockheed Martin (LMT.US)$ $RTX Corp (RTX.US)$ $Northrop Grumman (NOC.US)$

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