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• ARMH 56% Rate It

ARM Holdings has been getting hammered, but traders returned yesterday in search of new upside opportunities.

Last week our Heat Seeker monitoring program detected the purchase of more than 7,000 June 26 calls, betting that the chip maker would hold support around $25. It failed to keep that level, but the bulls came back yesterday with a longer-dated trade.

This time they bought 3,000 October 26 calls for $1.35 and sold an equal number of October 20 puts for about $1.10. Volume was more than 5 times open interest at both strikes.

The position cost about $0.25 and is similar to owning shares because the long calls will appreciate if ARMH rallies while the short puts will cause the trader to lose money if the stock falls. It differs from owning common equity because the trade will track the shares less closely as time passes and expire worthless if they remains between $20 and $26. (See our Education section)

ARMH fell 3.94 percent to $23.38 yesterday and has lost 18 percent of its value in the last month. Most of that decline came after the company issued revenue guidance on April 24 that was slightly weaker than expected. Results for the quarter, however, beat expectations.

The company's chips are used in Apple's iPhones and iPads. The stock rallied more than 700 percent between early 2009 and early 2011 and has been consolidating since then.

Overall option volume was triple the daily average in yesterday's session, according to the Heat Seeker.

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