One investor is calling a top for ARM Holdings.
optionMONSTER's Depth Charge monitoring program detected the
purchase of 6,000 November 28 puts for $1.30 and the sale of an
equal number of November 31 calls for $0.40. There was barely any
open interest at either strike before the trade appeared,
indicating that this is a new combination trade.
The investor paid $0.90 to open the position and has the right to
sell shares for $28 through expiration. Because the trader is also
on the hook to sell for $31 if they go above that level, the trader
probably owns stock in the name and is using the options for
Known as a
, the strategy is a common hedging mechanism on long positions. The
trade was done after ARMH rallied back to the same price area where
it had traded in late 2012 and early 2012. The stock peaked around
$31 in November, which is probably why it's being targeted as a
ARMH rose 0.87 percent to $27.97 yesterday and is up 21 percent in
the last three months. The chip maker has been trading in a
sideways range since early 2011 after a giant rally in the two
Overall option volume in the maker of mobile chips was 21 times
greater than average in the session, according to the Depth
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