Option Bulls Bombard Costco Wholesale Corporation (COST) After June Sales

Wall Street is responding favorably to Costco Wholesale Corporation's (NASDAQ:COST) June sales report

Jul 7, 2016 at 11:02 AM
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Retail stock Costco Wholesale Corporation (NASDAQ:COST) has gained 4.1% at $162.48, after the company reported a 3% increase in comparable sales for June, when excluding items. The stock has struggled in 2016, but today's gain has COST attempting to notch its first close in positive year-to-date territory. With stock volume on track to hit a 12-month high, options traders are also picking up the pace on COST. 

At last check, COST call volume was running in the 100th annual percentile, with 14 times as many calls traded compared to what is expected. The most popular options are the July 155 and 160 calls, with data suggesting a number of traders are closing positions at the strikes -- possibly bulls cashing in on their winning bets amid today's pop. 

Further down the line, the weekly 7/8 162.50- and 165-strike calls are possibly seeing buy-to-open activity. Said simply, traders are speculating on more gains for COST through tomorrow's close, when the weekly options expire. 

Indeed, call buying has been the preferred strategy among COST options traders. The stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.88, which tops 85% of the past year's readings. 

Analysts, for the most part, share this upbeat view of COST shares. Of the 17 brokerage firms covering COST, 10 rate it a "strong buy," two a "buy," and five a "hold," with no "sell" ratings to be found. 

There are still some Costco Wholesale Corporation (NASDAQ:COST) skeptics, though. While just a meager 2.3% of COST's float is sold short, the 10 million shares controlled by these bears sit just short of a five-year high. 

 

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