To The Moon

The agentic AI narrative is the direct catalyst for $ARM Holdings(ARM)$'s explosive 35% run over the last few days, pushing the stock past $300 and sending its valuation into the stratosphere.

A massive fundamental shift in how Wall Street views the "AI hardware stack" is underway, coupled with tactical options strategies tailored for a stock trading at these extreme, high-volatility levels.

I am holding ARM for long term, so in this article, I am exploring whether a bull put spread or strangle would be a better option for ARM.

1. The Narrative: Why Agentic AI Belongs to ARM

Until recently, the AI rally was almost exclusively a GPU story (Nvidia training massive models). However, the market realizes that Generative AI 1.0 (chatbots) is shifting to AI 2.0 (autonomous agents).

AI agents do not just answer questions; they execute multi-step workflows, handle memory management, manage data movement, and orchestrate security—all entirely on their own. This shift moves massive amounts of computing capacity from model training to model inference.

This transition fundamentally favors ARM for several reasons:

• The Renaissance of the CPU: While GPUs crunch numbers, CPUs are the traffic cops that orchestrate agentic workflows. ARM estimates that continuous agentic workloads increase the number of required CPU cores per data center gigawatt by roughly 4x.

• The AGI CPU Explosion: In March, ARM launched its new "AGI CPU" (a high-performance, 136-core data center chip purpose-built for agentic workloads). During its Q4 FY2026 earnings call in early May, ARM revealed that customer demand commitments for this chip doubled from $1 billion to over $2 billion in just six weeks. Meta is a lead co-development partner, with OpenAI, Cloudflare, and Microsoft Azure already signed on as customers.

• The Power-Efficiency Moat: Agentic AI requires massive, non-stop computing. ARM’s architecture is legendary for its power efficiency. Bernstein recently initiated an Outperform rating with a $300 price target, highlighting ARM as the structural beneficiary of server CPUs, a market they project could quadruple to $137 billion by 2030.

• The Nvidia Royalty Tailwind: Nvidia just announced that its new Grace/Vera CPUs (which pair with their next-gen Rubin GPU platform) are expected to drive massive revenue this year. Because that architecture is licensed from ARM, it means a massive wave of high-margin royalty revenue is heading straight to ARM’s balance sheet.

2. Can Investors Still Buy Equity at Current Highs?

Buying the raw stock here carries substantial downside risk for short-to-medium-term investors.

The Valuation Reality Check: ARM is now trading at a trailing P/E ratio north of 350x and a forward P/E well over 100x. While its gross profit margins are an incredible 97.5% (due to its IP licensing model), it is priced for absolute perfection.

Major institutional firms are completely split on this valuation. While TD Cowen and Bernstein have targets at $265–$300+, Morgan Stanley downgraded the stock to Equal-weight with a structural price target of $150, citing slow near-term commercial rollouts and an FTC antitrust probe.

If you have a 5-to-10-year horizon and want to scale in slowly via dollar-cost averaging, owning a small piece of ARM makes secular sense. But buying a full equity position after a 35% vertical spike exposes you to intense profit-taking pullbacks.

3. The Options Playbook: Mitigating the High-Price Risk

Because implied volatility (IV) has skyrocketed alongside the stock price, buying straight calls is incredibly expensive and exposes you to severe "IV crush" if the stock consolidates. Instead, utilizing high-IV to your advantage through multi-leg options spreads is a much sharper tactical approach.

Strategy A: The Bull Put Spread (Credit Spread)

If you want to express a moderately bullish view but refuse to buy the stock at $300, a Bull Put Spread allows you to get paid while defining your risk.

• How to set it up: Sell an out-of-the-money (OTM) Put (e.g., $260 strike) and buy a further OTM Put (e.g., $250 strike) for a net credit, using an expiration 30–45 days out.

• Why it works here: You are betting that even if ARM pulls back from its vertical run, the massive institutional demand and the $2 billion AGI CPU backlog will provide a "floor" under the stock.

• The Edge: You profit if ARM goes up, stays flat, or even drops slightly, as long as it stays above your short strike. Furthermore, the high IV inflates the premium you collect, giving you a wider margin of safety.

For us, I think we might prefer to do a $250 strike price at Sell Put, with $245 at Buy Put, expiration is around one months later at 26 June 2026. This might give us a better profits.

Strategy B: The Strangle (Long vs. Short)

Because of ARM's explosive nature, a strangle can be played in two entirely different ways depending on your risk tolerance:

The Verdict

The Bull Put Spread is the cleanest, risk-defined way to participate in the agentic AI momentum without committing major capital to equity at all-time highs. It allows you to set your "buy level" significantly lower than the current market price while letting high implied volatility work in your favor.

Expected Move

With ARM trading around $306.51, the market's expected move for the June 26 expiration (~34 days out) sits at roughly ±14% to 15% (approx. $43–$46), driven by elevated implied volatility (ATM IV ~85%).

This places the lower boundary of the expected move near $260.

Because your $250/$245 Bull Put Spread is safely below this expected boundary, it has a high probability of success (estimated >75%). You capture maximum profit if ARM stays above $250. The ultimate risk is a severe correction breaking past $245, risking the maximum $500 width minus premium collected.

Summary

The recent 35% surge in ARM’s stock is driven by a structural shift from Generative AI 1.0 (model training) to Agentic AI 2.0 (autonomous inference). While training relies heavily on GPUs, agentic workflows require continuous, autonomous multi-step execution, data routing, and memory management. This shifts immense computing workloads to server CPUs.

ARM is uniquely positioned to dominate this evolution for three key reasons:

• The CPU Core Explosion: Continuous agentic workloads are projected to quadruple the number of CPU cores required per data center gigawatt.

• Massive Backlog Growth: ARM’s newly launched, 136-core "AGI CPU"—engineered specifically for agentic inference—saw its customer demand commitments double from $1 billion to over $2 billion in a six-week period following its Q4 earnings call, backed by hyperscalers like Meta, OpenAI, and Microsoft.

• The Royalty Tailwind: Nvidia’s next-generation systems deploy CPUs licensed from ARM, ensuring ARM captures a high-margin royalty stream from the broader hardware rollout.

The Investment Verdict: Equity vs. Options

Buying raw equity at these all-time highs carries severe short-term downside risk. ARM trades at an extreme valuation (forward P/E over 100x), leaving it vulnerable to profit-taking or regulatory friction despite its pristine 97.5% gross margins. For long-term investors, scaling in via small, dollar-cost averaged tranches is acceptable, but chasing the vertical spike with a full position is risky.

Instead, utilizing high implied volatility (IV) through options strategies provides a safer tactical approach:

• Bull Put Spread (Recommended): Selling an out-of-the-money (OTM) put and buying a further OTM put allows you to collect a high premium inflated by current volatility. This strategy profits if ARM goes up, moves sideways, or experiences a minor pullback, establishing a defined-risk floor backed by institutional demand.

• Strangle: A Long Strangle (buying an OTM call and put) captures value only if ARM maintains massive, violent swings in either direction. A Short Strangle (selling both sides) capitalizes on the stock consolidating to digest its gains, but carries undefined risk if the explosive momentum resumes.

Ultimately, a Bull Put Spread offers the sharpest risk-to-reward ratio, allowing you to monetize the agentic AI momentum without overpaying for shares at the absolute top.

Appreciate if you could share your thoughts in the comment section whether you think doing a bull put spread might be more appropriate to capture ARM recent 35% upside with Bull Put spread whether you are existing long-term investors or planning to capture this upside..

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

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