Costco Wholesale Corporation (COST) Call Buyers Gamble on More Gains

Costco Wholesale Corporation's (COST) weekly 5/1 149-strike call is popular today

by Karee Venema

Published on Apr 20, 2015 at 1:33 PM
Updated on Apr 20, 2015 at 5:32 PM

Late Friday, Costco Wholesale Corporation (NASDAQ:COST) said it had upped its quarterly dividend by 13%, and reauthorized a $4 billion share repurchase program. Today, the stock is following the broader equities market higher, up 1.2% to trade at $146.27 -- and options traders are calling for even more upside over the next two weeks.

Taking a quick step back, COST calls are crossing the tape at two times the average intraday pace. Buy-to-open activity has been detected at the security's weekly 5/1 149-strike call, easily COST's most active option. By initiating the long calls, speculators expect the equity to rally north of $149 by next Friday's close, when the series expires.

This optimism toward COST shouldn't be too surprising, considering the shares were sporting a 27% year-over-year lead heading into today's session. More recently, the stock pulled back to its rising 100-day moving average after notching an early February record peak of $156.85, and bounced.

Daily Chart of COST Since April 2014 With 100-Day Moving Average

However, there are still pockets of pessimism found throughout the Street. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, COST's 50-day put/call volume ratio of 0.79 ranks in the 79th annual percentile. Should the shares extend their longer-term trajectory, a continued shift in sentiment in the options pits could help fuel Costco Wholesale Corporation's (NASDAQ:COST) fire.


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