The thesis under review: agents and AI data centres need far more general-purpose CPUs; Arm-based server chips (Graviton, Axion, Cobalt, Nvidia's Grace and Vera, Arm's own AGI CPU) take share from x86; Arm earns more per chip; so a 35% drawdown from the June record is an entry, and the stock can recover to $350 (the late-September high area) by Christmas. The practical question for this week: is now the moment to sell a put on it, with a jury verdict in the Qualcomm trial due within days and the next report on 4 November?
Our view in one paragraph. The CPU half of the thesis is genuinely strong: Arm reached a record 13.6% of server CPU units in the second quarter (Mercury), Arm-based accelerated servers outsold x86 by revenue (IDC), Nvidia now sells Vera as a standalone CPU, data-centre royalties more than doubled last quarter, and Arm's own AGI CPU has more than $2 billion of demand. The value-capture half is weaker: total royalties are guided to grow only in the low teens this quarter, Vera reportedly pays a lower rate than Grace, Qualcomm still pays the older v8 rate and is in court this week asking for up to five years royalty-free, and building its own chip has brought an FTC probe and customer friction. At about 95× next year's earnings, with 86% owned by SoftBank (which has borrowed $25 billion against the shares) and a beta near 3.8, the stock is not cheap after falling 35%; it is still up 169% this year and trades at the consensus target. We put $350 by Christmas at about one in five, a little below the market's . For a put seller the problem is timing, not price: the Qualcomm jury verdict is due within days and is a gap risk either way, and the 4 November report sits inside every useful expiry. Our advice is not to sell the ARM put today. Sell the Marvell put instead, and once the verdict is out, sell an ARM put spread (20 November $250/$220, about $5.85) or, if you would own it near $234, the January $250 put for about $16.43.
Independent data supports it. Mercury Research puts Arm at a record 13.6% of server CPU units in Q2 2026, with shipments nearly doubling year on year, driven by Nvidia Grace in NVL72 racks. IDC says Arm-based accelerated servers ($53.0 billion) outsold x86 ($34.6 billion) in Q1 by system value. Graviton5 (192 cores), Google Axion and Microsoft Cobalt are ramping, Nvidia sells Vera on its own and says it sees $20 billion of Vera revenue this year, and Neoverse has shipped more than 1.5 billion cores. Arm's claim of about half of hyperscaler compute is its own, not independent.
Verdict: true. The caveat is AMD: five straight record server quarters and a 2nm Venice chip that claims large efficiency gains.
Armv9 and compute subsystems carry higher royalty rates than v8, and the AGI CPU (136 Neoverse V3 cores, co-developed with Meta, production in the second half of 2026) lets Arm sell whole chips. Against that: Jefferies thinks Vera's royalty rate is below Grace's; Qualcomm's Oryon cores still pay the v8 rate and Qualcomm (about 9% of Arm's revenue) is suing for up to five years royalty-free in a Delaware jury trial that opened on 5 October; and the own-chip strategy has drawn an FTC probe (reported in May) into whether Arm will degrade or deny licences to the customers it now competes with.
Verdict: higher value per chip is happening in phones and data centres, but the own-chip move adds revenue at lower margins and has created legal and customer risk.
First-quarter revenue was $1.29 billion (+22%), royalties $715 million (+22%) and licensing $574 million (+23%); non-GAAP operating margin was 41.2% and EPS $0.45 against $0.40 expected. Data-centre royalties more than doubled. But the second-quarter guide ($1.38 billion, EPS $0.47) calls for royalty growth in the low teens; smartphone royalty growth for the year was cut to the high teens on memory costs; operating expenses are rising fast (stock compensation $343 million in the quarter); and about 30% of first-quarter revenue came from related parties (Arm China and SoftBank affiliates, including a $193 million SoftBank licence).
Verdict: the data-centre engine is real; the consolidated numbers grow at a fifth of the multiple's pace.
The drawdown has not made the stock cheap. Arm is up this year, trades at about 130× FY27 and 95× FY28 consensus EPS ($2.23 and $3.06) and 51× sales, and sits at the mean analyst target of about $291 (range $125–500). The 35% fall was a sequence of specific events: the FTC probe and supply limits on the AGI CPU (May–June), a Korea-led chip sell-off (23 June), a 34% July including an 8% post-earnings drop to $225, then a September round trip from $275 to $333 and back to $283. SoftBank owns 86% and has pledged about 72% of Arm's shares for a $25 billion margin loan; the loan-to-value is low (about 11%), so a forced sale is not a near-term risk, but SoftBank stress is a headline risk. The float is only 13% of the shares and short interest about 11% of it.
Verdict: a reasonable long-term owner's entry is lower, nearer the $225–240 lows of July to September, and the trade should wait for the verdict.
What confirms it: a close above $308 (the 2 October high) and then $320 (the call wall) after the verdict; Q2 royalty growth above the low-teens guide.
What confirms it: a close below $279 (the 28 September low) and then the $250 put wall; Q2 royalties below the low-teens guide.
| Date | Event | Why it matters for the thesis |
|---|---|---|
| ~9–13 Oct | Qualcomm v. Arm jury verdict (trial opened 5 Oct, five days scheduled; a parallel bench trial on good-faith negotiation) | The binary event before any trade: Qualcomm seeks up to five years royalty-free. |
| 16 Oct | Monthly options expiry | |
| 28 Oct | FOMC | Rates. |
| 4 Nov (after close) | Arm Q2 FY27 results (confirmed) | Royalty growth vs low-teens guide, data-centre royalties, AGI CPU supply; options price about ±11%. |
| 10 Nov | SoftBank Group results | Margin loan, OpenAI commitments, any monetisation of Arm shares. |
| ~mid–late Nov | Nvidia results | Vera volumes. |
| 20 Nov | Monthly options expiry | The recommended put spread's expiry, after the report. |
| 8–9 Dec | FOMC with projections | |
| ~11 Dec / 21 Dec | Nasdaq-100 reconstitution announcement / effective (expected) | Arm is already a member. |
| 24 Dec | Target date | |
| Any time | Third Circuit ruling on the earlier Qualcomm case; FTC action | Legal overhang. |
Daily closes (Yahoo Finance; IB Gateway's history service was unavailable on the morning of this report). Hover for values; the table shows the same data.
| Total return | 1 week | 1 month | 3 months | 6 months | YTD | 1 year |
|---|
Arm has roughly doubled in six months and is still up about 169% this year despite the 35% fall from June; Qualcomm, its largest licensee and current courtroom opponent, is up single digits. The relative strength is real but has been far more volatile than the semiconductor ETF in both directions.
Blue candles closed up, red closed down. Orange dashed: dealer-gamma levels (call wall, put wall, gamma flip); swing support and resistance are listed in the key-levels table. Hover for the crosshair: the price is tagged on the price axis and the date on the time axis. Right panel: net dealer gamma per strike on the same price axis (blue where dealers are long gamma, red where short).
Trend: a broken parabola, now basing. Arm ran from $100 in February to $452.70 on 18 June, fell by half to $219–225 in late July and early August, and has since made higher lows: $225 (3 September), $238 (14 September) and $279 (28 September). The 21 September gap (+17% on three times average volume) to $323 ran to $337 on 23 September, then failed: −8% on 24 September and −9% on 28 September. Since then the stock has held $280–308 on falling volume; yesterday it opened lower at $291 and closed at $294, and it is indicated lower again before today's open, near .
Levels. Overhead: $299–308 (the August swing high and the 2 October high), the $320 call wall, then $337 (the September high), $428 and the record. Below: the 20-day average at $288, the gamma flip near $286, the $279 late-September low, the 50-day at $268, the $250 put wall, then $238–243 and $225–233 (the July–September lows) and the 200-day at $219.
Volume. Volume has dried up to 3–4 million shares a day against a 20-day average of : the market is waiting for the verdict. A move on volume after it will set the direction for the next month.
Technical verdict: neutral with a binary catalyst. Higher lows since August and above the 50- and 200-day averages, but a failed breakout at $337 and a price sitting on the gamma flip. A close below $279 opens the $250 put wall and the $238 shelf; a close above $308 reopens $320–337. For a put seller, the strikes the chart defends are $250 (put wall) and $240 and below (the September shelf), not $270–280.
| Level | Price | vs spot |
|---|
Support and resistance are clustered swing lows and highs from the last eight months of daily bars; the gamma levels come from CBOE open interest.
What the profile says for Arm. Unlike Marvell, Arm's dealer book is thin and balanced: about of net gamma per 1% move in total and slightly negative () over the next 35 days. The largest strikes are the $320 call wall (about $12 million net), $310 and $300 on the call side, and $250 ($5 million net short), $280, $290 and $270 on the put side. The gamma flip sits near $286, about where the stock trades: below it dealers are short gamma and hedge in the direction of the move, so a bad verdict would not be cushioned until the $250 put wall. That is the main reason the recommended short strikes are at $250 or below.
How to read this. Market makers who sell options hedge them with stock; how much stock they must buy or sell as the price moves is their gamma. We estimate it from CBOE open interest for every listed strike and expiry, recompute each option's gamma with Black-Scholes from its own implied volatility, and sign it by the usual convention: dealers are long the calls customers sell and short the puts customers buy. Positive net gamma means dealers sell as the stock rises and buy as it falls, dampening moves; negative means they chase the move and amplify it. The sign convention is an assumption, and open interest is end-of-day, so the profile changes after every expiry.
Realized volatility from daily closes; implied volatility is today's 30-day at-the-money value from the CBOE chain (IB Gateway's implied-volatility history was unavailable this morning). The one-year IV range and rank come from Interactive Brokers via the put screen of 7 October.
Solid: implied volatility of the at-the-money option for each listed expiry, on a calendar axis. Dashed: the forward volatility the market prices for the period between one expiry and the next; the spike is the earnings report. From CBOE's delayed chain.
Last three months of closes, then the range the market prices to each expiry: today's price plus and minus the at-the-money straddle (shaded, the expected absolute move) and ± one standard deviation from at-the-money IV (dotted). Green dashed: the report's target.
Out-of-the-money puts left of spot, calls right of spot, for the first monthly expiry after a month, the expiry that carries the earnings report, and January. A smile that rises to the right means upside calls are bid: the market pays up for a squeeze.
Premium is high in absolute terms and below realized. Thirty-day at-the-money IV is against realized volatility of (20-day realized has been above 90%), with an IV rank of in a one-year range of –. A put seller is paid a lot of dollars, but not more than the stock has been moving.
The term structure has an earnings hump. At-the-money IV is about 61–63% through 30 October, jumps to 74% for 6 November (the first expiry after the 4 November report), then eases to 70% for 20 November, 67% for December and 64% for January. The market prices the report at about ±. That is generous against history: the last eight reports moved the stock +4.1%, −3.3%, −6.2%, −13.4%, −1.2%, +5.7%, −10.1% and +7.4% the next day, a mean absolute move of 6.4%. Selling premium through Arm's report has usually paid; the problem this week is the verdict, which is not in the term structure as a separate hump because no expiry isolates it.
The smile leans to the upside, strongly. 25-delta calls trade 2–6 volatility points above 25-delta puts from November onwards: a small float and a short-squeeze history make upside calls the expensive side. Downside puts are therefore relatively cheap for this stock, which is a reason to use a put spread (short put funded partly by a long put that is not expensive) rather than a naked put through two binary events.
The cone. One standard deviation to the target date is ±; the 20 November straddle prices ±20% and the January straddle ±27%. $350 is inside the one-sigma cone; so is $210.
| Structure | How it is built | What you want | Risk | Best used when |
|---|---|---|---|---|
| Long call | Buy a call | A big move up, fast | The premium (100% if it expires below the strike) | You expect a move larger than the market prices; implied volatility is low |
| Bull call spread (debit) | Buy a call, sell a higher call | The stock at or above the upper strike at expiry | The net debit | You have a price target and a date; you want the highest return per dollar to that target |
| Cash-secured short put (credit) | Sell a put, hold the cash to buy the shares | The stock to stay above the strike; you keep the credit | Owning the shares at the strike in a sell-off (large, stock-like) | You would be happy to own the stock lower; volatility is high |
| Bull put spread (credit) | Sell a put, buy a lower put | The stock above the short strike at expiry; keep the credit | Spread width minus credit (defined) | You are bullish-to-neutral and want to be paid to wait with a known worst case |
| Risk reversal | Sell a put, buy a call (often for zero cost) | A large rise; behaves like stock above the call strike | Stock-like below the put strike; margin required | You want stock exposure without paying premium and accept the downside |
| Put-financed call spread | Sell a put, buy a call spread | The stock at the top of the spread; the put pays for it | Stock-like below the put strike | You want a call spread for free and accept assignment risk |
| Put spread + call spread | Sell a put spread, buy a call spread | The stock above the call spread's top strike | Both spreads' widths minus net credit (defined both ways) | You want a leveraged payout at the target and a known worst case, with part of the cost paid by the put spread |
Returns on the short-put structures below are shown on a cash-secured basis (capital = strike minus credit). Brokers typically require about 20% of that as margin; for a stock this volatile expect more.
Two briefs: a put sale (be paid to own Arm below the price) and the bullish thesis to $350 by 24 December. We priced every $5–10 strike call from $250 up and put from $175 to $300 in the November, December, January and February monthlies from CBOE's chain (Interactive Brokers' history service was down this morning; quotes are the latest delayed CBOE mids), and valued each structure on the target date under four scenarios.
Scenarios on 24 December: Bear $225 (−22%, an adverse verdict or report; implied volatility +6 points) · Flat $288.60 · Base $314.50 (+9%) · Bull $350 (+21%, the thesis; implied volatility −7 points).
| Trade | Net | Max loss | Break-even | Delta | PoP |
|---|
Net is the mid-price debit (paid) or credit (received) per share; one contract is 100 shares. Max loss is the capital at risk per share (for a short put, the strike minus the credit). PoP is the lognormal probability, at today's implied volatility, of finishing above break-even at expiry. Scenario cells show profit or loss as a percentage of the capital at risk on 24 December (20 November trades have expired by then, so their cells are the result at expiry); −100% means a total loss. Highlighted rows are the recommendation.
| Trade | Capital at risk | P&L | Return |
|---|
Pick up to four trades. Values on the target date use Black-Scholes with each contract's own implied volatility; trades expiring before then show their value at expiry.
Wait for the Qualcomm verdict (expected within days) before selling anything on Arm, then use defined risk through the 4 November report. Prices below are this morning's and will move with the verdict; re-price before trading.
| Strike | Bid | Ask | Mid | Break-even | IV | Delta | Theta/day | Volume |
|---|
Option quotes, Greeks, open interest, term structure, smile and dealer gamma: CBOE delayed chain (fetched ). Daily prices: Yahoo Finance (IB Gateway's historical-data service timed out this morning); one-year IV range and rank: Interactive Brokers via the put screen of 7 Oct 2026. Fundamentals and news: Arm Q1 FY27 results and call (29 Jul 2026), 20-F (May 2026) and 6-K (Q1); Business Wire on the Q2 date (5 Oct 2026); Mercury Research via The Register (21 Aug 2026); IDC (Jun 2026); TechPowerUp and Yahoo on Nvidia Vera; DCK and Omdia on the AGI CPU; Bloomberg and PYMNTS on the FTC probe (15 May 2026); Bloomberg on SoftBank's margin loan (18 Sep 2026); Reuters/KFGO, Lawyer Monthly and DigiTimes on the Qualcomm trial (5–6 Oct 2026); TIKR, TradingKey, the Motley Fool and 24/7 Wall St on the drawdown and September moves; yfinance and MarketBeat for consensus and statistics (7–8 Oct 2026); Federal Reserve H.15 and Schwab on rates; Yahoo daily closes for earnings-day moves.