Arm Stock Pops on Artificial Intelligence Chip Plans

Options bulls are excited about the update

Deputy Editor
May 13, 2024 at 10:38 AM
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Wall Street newbie Arm Holdings PLC (NASDAQ:ARM) is 2.8% higher to trade at $111.91 at last glance, after Nikkei Asia reported the semiconductor name hopes to launch its first artificial intelligence (AI) chip next year.

With all the hype surrounding AI chips, it's no surprise that bullish options traders were quick to respond to ARM's update. Already today, 53,000 calls have exchanged hands, or double the intraday average volume.  The most active contract by far is the May 120-strike call, followed by the 115-strike call in that series, with new positions opening at both.

A short squeeze could power up gains, considering short interest fell 8% in the most recent reporting period, yet 7% of the stock's total available float is still sold short. The equity looks to be a good target for premium buyers, too, based on its Schaeffer's Volatility Scorecard (SVS) of 84 out of 100. In other words, Arm stock has regularly made bigger moves than options traders were priced in over the past 12 months.

On the charts, ARM just moved above short-term pressure at its 30-day moving average. The security is outperforming the VanEck Semiconductor ETF (SMH) on a year-to-date basis, with the former up 49.3%, and the latter up 27.5%.


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