Is Bearish Sentiment On ARM Holdings In The Options Market A Concern?

ARM stock is up 1.86% at close on 26 Sep 24, this is despite there is bearish sentiment in the options market, ARM holdings continue to show bullish movement.

The conflicting opinions in the options market may have led to increased volatility in ARM's stock price.

The U.S. Federal Reserve's decision to cut benchmark interest rates might have also contributed to the overall bullish sentiment in the tech sector, benefiting companies like ARM Holdings.

From the option open interest we are seeing that put contract have increased on the contingency section on trading volume.

ARM Open Interest: The option open interest in ARM climbed 1.2% to 806,638 contracts. The current open interest is above its 52-week average of 545,919 contracts. Currently, the OI percentile rank is 80.0%. So, ARM had a higher OI only 20.0% of the days in the last year.This indicates there is a lot more demand to trade and carry option positions in ARM than normal. The most notable increase was in the 04-Oct-24 expiration which added +2,912 contracts.

ARM Call Open Interest: The open interest in ARM call options increased by 1.2% to 430,739 contracts. However, call open interest is down -6.3% in the last 5 days. Compared to its 52-week average of 293,966 contracts, the current call open interest for ARM is stronger than usual.

ARM Put Open Interest: The open interest in ARM put options has grown by 1.1% to 375,899 contracts. However, put open interest has fallen -10.4% in the last 5 days. Compared to its 52-week average of 251,953 contracts, the current put open interest for ARM is higher than usual.

ARM Put/Call Ratio (Open Interest): In the last 5 days, the put/call ratio for ARM decreased by -4.3% to 0.9.

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts is increasing relative to upside calls, this suggests the market is pricing in a larger fear to a downside move.

Despite this slightly bearish sentiment, ARM have been gaining this week since 23 Sep, reaching a high of near $151.

If we were to look at the technical analysis, the multi-timeframe is still showing strong uptrend for ARM, despite a slight decline experience.

There is a decisive signal coming from MACD and we might be seeing a crossover, so this is something we need to be watching.

The impact from SMCI on ARM is still unknown, but we should be able to see a clearer picture on Friday trading (27 Sep).

I think ARM holdings still have some upside to continue, as the demand for AI chips need design and that is ARM main business, so impact from SMCI might be short-term.

Appreciate if you could share your thoughts in the comment section whether you think ARM would continue to exhibit bullish movement since AI demand is coming back.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.