How ARM trade is positioned for fall

optionMONSTER

A large put trade is looking for more potential downside in microprocessor company ARM Holdings.

optionMONSTER systems show that a trader bought 19,691 July 37 puts for $0.90 yesterday, above the listed ask price at the time, in volume far above the previous open interest of just 315 contracts. In the following seconds, he or she sold large blocks of June 39 puts, with 8,204 going for $0.65 and another 5,468 for $0.60 against open interest of 13,944 at that strike.

The trader appears to be rolling a long-put position out a month to a lower strike price. Selling the June puts reduces the cost of the July purchase. The new puts, which lock in the price where the stock can be sold no matter how far it might fall, are looking for ARMH to trade below $37 by expiration in mid-July. (See our Education section)

ARMH fell 1.08 percent to $40.13 yesterday, its lowest close in almost two months. Shares climbed above $50 by mid-May along with strong earnings results but have given up those gains, though they are still almost double their price at the lows of last July.

Overall options in the name totaled 42,245 contracts yesterday, compared to a daily average of 3,326.

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