Costco Wholesale Corporation (COST) Earnings Spark Eleventh-Hour Bets

Costco Wholesale Corporation (COST) traders are buying short-term 150-strike options

by Griffin Kruse

Published on Mar 5, 2015 at 2:53 PM
Updated on Apr 20, 2015 at 5:32 PM

After releasing an impressive fiscal second-quarter earnings report earlier today, Costco Wholesale Corporation (NASDAQ:COST) is up 2.6% to reach $151.02, bringing the stock's year-over-year gain to 33.3%. Accordingly, activity in the options pits is heating up, with speculators gambling on the retailer's short-term trajectory.

COST options are moving at three times the usual intraday pace today, with the weekly 3/6 150 strike seeing buy-to-open action on both sides. By purchasing the calls, traders expect the security to extend its journey north of $150 through tomorrow's close, when the weekly contracts expire. On the flip side, the put buyers expect COST to retreat beneath the strike by the end of the week.

Delta on the weekly 150-strike call stands at 0.69, implying a 69% chance of expiring in the money. Meanwhile, delta on its put counterpart has fallen to negative 0.27, from negative 0.76 at yesterday's close.

From a broader perspective, put buying has picked up over the last 10 weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.91 stands 13 percentage points away from an annual high. Should Costco Wholesale Corporation (NASDAQ:COST) continue its ascent, a mass exodus of option bears could propel the shares even higher.

Daily Chart of COST Since March 2014

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