By Saqib Iqbal Ahmed
NEW YORK (Reuters) - Options on the newly listed shares of SoftBank (TYO:9984)'s Arm Holdings (NASDAQ:ARM), the year's biggest initial public offering, traded on Monday at a brisk pace, with many investors positioning for further downside.
The shares closed down 4.5% at $58.00, having risen as high as $69 on Friday, its second day of trading. Bernstein started coverage of the stock with an "underperform" rating.
Some 74,000 Arm options contracts changed hands on Monday, the first day options were available for trading. Arm made the list of the 50 most actively traded single-stock names in the options market on Monday, according to options analytics service Trade Alert.
The record for the most active options market debut is the 2012 listing of Facebook, now known as Meta Platforms (NASDAQ:META), which saw some 360,000 contracts changing hands on the first day of trading.
About 82% of Arm's options trading volume was concentrated in contracts set to expire on Oct. 20, with much of the volume in puts, typically used to guard against or bet on share price declines.
"The volume is robust," said Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories.
"The stock has fallen quickly... There is substantial selling pressure; put action could be speculations on further downside," Gottlieb said.
On Monday, puts that would guard against Arm shares slipping below $50 by mid-October were the most actively traded Arm options, with nearly 11,000 contracts traded.
"The trading has been concentrated in the front-month downside puts," ORATS founder Matt Amberson said, noting that ARM's options skew - a gauge of the relative demand for puts and calls - was high.
"This shows that probably the puts were on-balance purchased," Amberson said.
In its note on Arm, Bernstein said it was "too soon to declare them an AI winner" and said it would "remain more conservative on their ability to deliver increased royalty rates at the pace management is guiding."