How to Trade ARM Stock: Arm Holdings Trading Guide

Arm Holdings (ARM) is a British technology firm specialising in creating and licensing Internet Protocol (IP) solutions for various processing and connectivity technologies. Semiconductor manufacturers utilise Arm's designs in various devices, including smartphones, IoT (Internet of Things) gadgets, and automotive systems.

With the company’s intellectual property used in many industries globally, trading ARM stock can provide opportunities to potentially benefit from its market performance.

This guide will explore the history of Arm Holdings’ stock, factors influencing its share price, and different ways to trade ARM. We’ll also explore popular CFD trading strategies.

By the end of this guide, you’ll understand how to approach trading ARM stock and be equipped with insights and strategies to inform your trading decisions.

What Is Arm Holdings?

Arm Holdings Plc., located in Cambridge, England, is a technology company specialising in semiconductor and software design. Unlike traditional manufacturers, Arm does not produce its own products. Instead, the company licences its designs to over 1,000 other firms, including Apple (AAPL) and Microsoft (MSFT), which then manufacture and integrate these processors into their products. This business model differentiates Arm from many other businesses in the semiconductor industry.

Their main focus is creating central processing unit (CPU) cores using the ARM architecture. ARM is an acronym for “Advanced RISC Machines.” RISC stands for “Reduced Instruction Set Computer,” a type of computer architecture designed to simplify code processing.

Founded in 1990, Arm is majority-owned by the Japanese conglomerate SoftBank (9984. TY). Approximately 70% of the world’s population uses products that rely on Arm’s chips, including nearly all of the world’s smartphones. This highlights the significant influence Arm has in the global market.

In addition to designing CPUs, Arm also creates other chips and offers software development tools through brands like DS-5, RealView, and Keil. The company provides systems and platforms, system-on-a-chip infrastructure, and software.

As a holding company, Arm also owns a controlling interest in other businesses, such as Arm Embedded Technologies Private Limited, Arm France SAS, and Pelion, referred to as subsidiaries.

Arm Holdings is publicly traded, with its stock listed on the NASDAQ under the ARM ticker.

The History of ARM Stock

Arm Holdings went public on 14 September 2023 at $51 per share. On the first day of trading, the stock closed at $63.59, reflecting a 25% increase from its initial public offering (IPO) price. At its IPO, Arm Holdings had a market capitalisation of approximately $54.5 billion.

The company's first quarterly earnings report post-IPO was released on 14 December 2023, revealing a revenue of $746 million.

Following its initial success, Arm's stock experienced fluctuations, reaching its all-time low of $46.50 on 13 October 2023. However, the stock demonstrated significant growth, peaking at an all-time high of $188.75 on 9 July 2024. By July 2024, Arm's market capitalisation had risen to around $181.5 billion.

In March 2024, Arm expanded its capabilities in the AI sector by acquiring a smaller AI chip startup. Despite its growth, Arm has decided to reinvest its profits into research and development rather than declare dividends as of July 2024.

Factors Influencing ARM Stock Price Movements

Various factors can impact the ARM share price, including:

• Technological Demand: The demand for advanced artificial intelligence (AI) software and the hardware that makes those apps work can significantly boost trader interest in companies like ARM that manufacture AI hardware.
• Financial Performance: ARM's financial performance, such as revenue and earnings, can significantly impact its stock price. For instance, better-than-expected royalty revenue and strong revenue growth have been cited as reasons for past increases in ARM's stock price.
• Regulatory Developments: Regulatory developments can significantly impact ARM's stock price. For example, adopting the CHIPS Act, designed to boost the domestic semiconductor manufacturing sector, may have implications for ARM and other companies in the semiconductor industry.
• Advancements in Semiconductor Technology: ARM's strategic positioning within the AI ecosystem, advanced v9 architecture, and power-efficient processor platforms have garnered attention from major industry players, potentially enhancing ARM's position in the semiconductor market.
• Competitive Pressures: Competition can also influence ARM's stock price. For instance, ARM's potential market share gains against companies like Nvidia (NVDA) and AMD (AMD) have been cited as reasons for ARM stock price increases.

A thorough grasp of these elements and other potential share price drivers is essential for anyone trading ARM stock.

Arm Holdings Stock Trading

There are several ways to trade ARM Holdings stock, each offering unique features and risks.

ARM Shares

A popular way to trade ARM stock is by buying shares. Listed on the NASDAQ exchange, the ARM share price, typically quoted in US dollars, reflects the market’s valuation of Arm Holdings. Purchasing shares can provide traders with direct exposure to ARM’s financial performance and market dynamics.

While buying shares may lead to potential profits if ARM’s financial results are strong and the market dynamics favourable, it’s important to remember that the value of shares can also decrease, resulting in potentially significant losses.

ARM ETFs

Another method for trading ARM stock is through exchange-traded funds (ETFs), which include ARM and other companies to track specific market indices or sectors. Certain technology sector ETFs hold substantial positions in ARM, offering exposure to the broader tech market with a single transaction. For instance, the First Trust IPOX Europe Equity Opportunities UCITS ETF includes ARM Holdings in its portfolio.

ETFs can be traded throughout the day like individual stocks, but transaction fees and expense ratios must be considered when trading ETFs.

ARM Share CFDs

Stock contracts for difference (CFDs) offer an alternative for traders interested in speculating on price movements without owning the actual shares. Trading CFDs on ARM allows traders to leverage their positions, potentially increasing profits with a smaller initial capital outlay, though this also increases the risk of potential losses.

Unlike traditional stock trading, CFDs enable traders to speculate on both upward and downward price movements, providing greater flexibility and introducing higher risk into trading strategies.

How To Trade ARM CFDs

Trading ARM CFDs allows traders to gain exposure to the price movements of ARM stock without owning the actual shares. CFDs are leveraged products, meaning traders only need to deposit a fraction of the total trade value, known as margin. This leverage can amplify both potential profits and losses based on market movements.

When trading ARM CFDs, traders can speculate on price changes by either buying (going long) if they expect the stock price to rise or selling (going short) if they anticipate a decline. Profits or losses are determined by the extent of the price movement in the chosen direction.

ARM CFD Trading Example

Looking at an example of trading ARM CFDs can help illustrate the potential gains and losses based on market movements.

Suppose you open a buy position on ARM CFDs because you believe the stock price will increase. If the current price of ARM is $150 and rises to $160, you could sell your position and potentially profit from the $10 increase per share. However, you would lose if the price drops to $140 instead.

Conversely, if you decide to sell ARM CFDs because you anticipate the stock price will fall, you might sell at $150. If the price decreases to $140, you could buy back your position and potentially profit from the $10 decrease per share. However, you would lose if the price rises to $160 instead.

This example demonstrates how trading ARM CFDs can result in gains or losses based on price movements. Managing your positions carefully is essential, considering your risk tolerance and using strategies such as stop orders to mitigate potential losses.

CFD Trading Strategies for ARM Stock

Effective trading strategies can make a significant difference when trading CFDs for ARM stock. Moreover, understanding technical and fundamental analysis is crucial as part of any trading strategy, as these methods can help traders make informed decisions.

The following are three popular trading strategies you can consider for ARM CFDs:

Trend Trading

Trend trading focuses on identifying the market's direction and maintaining a position until you see signs of a potential reversal. This strategy operates on the principle that "the trend is your friend." Traders aim to enter a CFD position early in the trend's development and exit once the trend shows signs of ending. Trends can be upward (bullish) or downward (bearish).

To execute this strategy, traders may use technical indicators such as moving averages and the (RSI) or base their decisions on the company's consistent financial performance.

Range Trading

Range trading involves spotting entry and exit points within a stable market where prices move between support and resistance levels. Traders typically open long CFD positions near the support level, exit near the resistance level, and vice versa for short positions.

This strategy often relies on technical indicators like the RSI and stochastic oscillators to help identify overbought or oversold conditions. Limit orders are commonly used to automate trades, ensuring execution around key price levels.

Breakout Trading

Breakout trading entails entering a trade at the beginning of a significant price movement, aiming to capitalise on this momentum. Traders look for points where the price breaks through support or resistance levels and enter positions anticipating continued movement in that direction.

Stop-entry orders are frequently employed to initiate trades upon confirmation of a breakout. Volume indicators help assess the strength of the breakout, with rising volumes indicating a stronger trend. Candlestick patterns and well-defined trade plans are essential tools for managing breakout trades.

By applying these and other available strategies, traders can potentially navigate the fluctuations of ARM stock more effectively, balancing the opportunities for profit with the inherent risks.

Risk Management for ARM Stock Trading with CFDs

Risk management is crucial when trading CFDs, especially due to the leverage involved. Strategies such as stop-loss orders, trailing stops, and take-profit orders can help mitigate potential losses and protect trades from rapid market fluctuations. Information about market news and events that could impact ARM's stock price is also essential for trading decisions.

Remember that while risk-management tools may help lower the chance of losses, there are no guarantees, so traders should only trade with the amount they can afford to lose.

ARM Stock Trading Hours

Since ARM Holdings stock is traded on the NASDAQ exchange, it can be bought or sold on weekdays between 9:30 a.m. and 4:00 p.m. Eastern Time (ET), Monday through Friday.

However, ARM trading is not limited to standard market hours. The pre-market session begins at 4:00 a.m. and closes at 9:30 a.m. ET. Additionally, the after-hours market offers another opportunity for trading from 4:00 p.m. to 8:00 p.m. ET.

For CFD traders, the extended hours can create opportunities and offer additional flexibility. For instance, the market may be more active during these extra hours due to the release of economic news or earnings reports. However, pre-market and after-hours trading may also come with less liquidity, wider spreads, and greater price volatility.

If you place an order outside the hours your brokerage allows you to trade, it will be processed once trading resumes.

Please note that trading hours on the Plus500 platform may differ.

Conclusion: Understanding Arm Holdings Stock Trading

Understanding how to trade ARM stock through shares, ETFs, or CFDs requires a solid grasp of the company's history, market influences, and various trading strategies. By employing risk management techniques and staying informed about market developments, traders can better navigate the complexities of trading ARM stock and make more informed decisions.

If trading Arm Holdings CFDs piques your interest, you can start trading ARM CFDs on Plus500.

ARM Stock Trading FAQs

What are some factors that influence ARM's stock price?

Key factors influencing ARM's stock price include technological demand, particularly in AI software and hardware, and the company's financial performance. Regulatory developments, advancements in semiconductor technology, and competitive pressures also play significant roles in shaping ARM's market value.

What are some popular CFD trading strategies for ARM stock?

Popular CFD trading strategies include trend trading, focusing on maintaining positions in the direction of market trends until signs of reversal appear. Other strategies like range trading involve identifying stable price levels for entry and exit points, while breakout trading aims to capitalise on significant price movements at the start of new trends.

When did ARM Holdings go public?

ARM Holdings went public on 14 September 2023 on the NASDAQ exchange with an initial offering price of US$51 per share.