Stocks quoted in this article:
ARM Holdings plc (ADR) (NASDAQ:ARMH) is bucking the broader market path higher today, shedding 0.7% to hover at $46.35. Since surging nearly 8% higher on Tuesday during Apple Inc.'s (NASDAQ:AAPL) media event, the stock has been catching its breath. This short-term price dip hasn't been lost on option bears, as approximately 15,000 puts have switched hands thus far -- almost 15 times the equity's expected intraday volume. By contrast, just over 900 calls have been exchanged. It looks as though one group of traders is expecting the stock to backpedal over the course of the next several days.
More specifically, nearly 10,400 puts have crossed at the September 45 strike, including a large block of 7,238 contracts, which traded off the ask price of $0.45 each. Since this option currently holds open interest of just 307 contracts -- and implied volatility has climbed 1.3 percentage points -- it's likely that new bearish positions have been established here.
In order for the block speculator to secure a profit from his bought-to-open puts, ARMH must fall below the breakeven rail of $44.55 (strike price less the net debit paid) by front-month expiration. This reflects a drop of 3.9% from the stock's present perch. Additionally, the delta for this option sits at negative 0.28, implying it has a 28% chance of moving into the money ahead of the close on Sept. 20.
Should the security remain north of the strike price throughout the put's lifetime, the most today's bear stands to forfeit is the initial cash outlay. What's more, ARMH's Schaeffer's Volatility Index (SVI) of 34% ranks lower than all but 35% of similar readings taken during the past year, indicating the stock's near-term options are relatively inexpensive right now.
Today's decline aside, ARM Holdings plc (ADR) (NASDAQ:ARMH) has done well on the charts, gaining more than 22% year-to-date, and roughly 69% year-over-year. The shares have also outpaced the broader S&P 500 Index (SPX) by close to 22 percentage points during the past three months. Against this strong backdrop, it is possible that some of today's put volume represents ARMH shareholders protecting recent gains over the short term.
Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis®
perspective, please visit our Trading Floor Blog section.