Semiconductor developer and manufacturer Arm Holdings (ARM) is down 14% over the past year, as shares have recently given up their recent gains. One trader sees a rebound into the summer.
That’s based on the August $125 calls. With 155 days until expiration, 4,189 contracts traded compared to a prior open interest of 129, for a 32-fold rise in volume on the trade. The buyer of the calls paid $14.70 to make the bullish bet.
Arm shares recently traded for about $112, so the stock would need to rise by $13, or 11.6%, for the option to move in-the-money. The strike price is still well off of Arm’s $180 price range from as recently as January.
While Arm shares have declined over the past year, revenues are up a solid 19%, and earnings growth has surged a massive 190%.
Even with strong growth, Arm shares trade at a rich 58 times forward earnings.
Action to take: Arm shares are back into a heavily traded zone, so interested investors in the chip space could fare well buying shares here and looking to sell them on the next rip higher. Such a rip would likely take the stock to the $150 range.
For traders, the August $125 calls have enough time on the trade for the next leg higher, and the option could see mid-double-digit returns on a rally higher in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.