By Saqib Iqbal Ahmed

NEW YORK Options on the newly listed shares of SoftBank's Arm Holdings, the year's biggest initial public offering, started trading on Monday, at a brisk pace, as a drop in the share price prompted investors to take guard.

Arm shares fell 5.3% to $57.50, after rising as high as $69 on Friday, its second day of trading.

Some 29,000 Arm options contracts changed hands by 11:45 a.m. (1545 GMT) on Monday, the first day options were available for trading, with volume projected to hit 63,000 by the end of the day, according to options analytics service Trade Alert.

The 2012 listing of options on Facebook Inc, now known as Meta Platforms, holds the record for the most active options market debut with some 360,000 contracts changing hands on the first day of trading.

"The volume is robust," said Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories.

About 80% of the options trading volume was concentrated in contracts set to expire on Oct. 20, with much of the volume in puts, typically used to guard against or bet on share price declines.

"The stock has fallen quickly. ... There is substantial selling pressure; put action could be speculations on further downside," Gottlieb said.

On Monday, puts that would guard against Arm shares slipping below $55 by mid-October were the most actively traded Arm options with some 4,500 contracts traded.

"The trading has been concentrated in the front-month downside puts," ORATS founder Matt Amberson said, noting that ARM's options skew - a gauge of the relative demand for puts and calls - was high.

"This shows that probably the puts were on-balance purchased," Amberson said.

(Reporting by Saqib Iqbal Ahmed; Editing by Richard Chang)