The surge in interest surrounding artificial intelligence stocks propelled options traders towards Arm Holdings on Monday, as investors clamored to capitalize on the company's meteoric rise. Arm Holdings' shares skyrocketed by 80% since Wednesday, fueled by optimistic forecasts for quarterly results fueled by the growing demand for its chip-designing technology tailored for artificial intelligence applications.The exponential increase in Arm's stock price triggered a flurry of activity in the chip designer's options market, with trading volumes soaring to approximately 490,000 contracts per day over the past three sessions. This surge, surpassing the options' average daily trading volume in the previous month, underscores investors' fervent pursuit of identifying the 'next NVIDIA.' Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, noted that the heightened bullish options activity likely contributed to the stock's upward momentum.

Nvidia, a prominent figure in the artificial intelligence sector, has seen its stock surge by approximately 220% over the past year, cementing its position as the best-performing S&P 500 stock during that period.By midday Monday, a staggering 600,000 Arm contracts exchanged hands, with projections indicating a record-breaking volume of 816,000 contracts for the day. With Arm shares climbing 20% to $137.72, call options predicting shares to rise above $185 by Friday emerged as the most actively traded contracts. Call options, granting the right to purchase shares at a predetermined price in the future, dominated trading activities, while puts, offering the right to sell shares, also saw considerable activity. Despite the substantial gains witnessed, bullish options bets remained in play, indicating continued confidence in Arm's prospects. Additionally, heightened activity in Arm puts suggested some investors were seeking to secure recent gains in the stock. Although Arm's technology isn't directly involved in AI work, its appeal lies in being chosen by companies like Nvidia for central processing units complementing AI-specific chips.