What's behind put surge in ARM

optionMONSTER

A large put trade hit ARM Holdings at the end of last week.

optionMONSTER's Heat Seeker system shows that 7,000 March 49 puts were sold for the bid price of $0.85 against previous open interest of 9,729. At the same time, the trader bought 7,000 March 50 puts for $1.25 in volume far above that strike's open interest of just 289, clearly indicating a new position.

This could be a new ratio spread , with the trader spending $0.40 for the potential to make $0.60 if the stock slips, though he or she would be on the hook to buy shares below $49. Alternatively, the trader could be rolling long puts up a strike to get more exposure to a potential pullback. (See our Education section)

ARMH ended Friday up fractionally at $50.20, its highest close since Jan. 22. That ended a strong month for the U.K.-based chip maker, which began February at support at $42.

Total option volume in the name was 16,777 contracts, more than 10 times the daily average for the last month.


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