Costco Wholesale Corporation (COST) Options Traders React to Weak August Sales

Options volume is surging as Costco Wholesale Corporation (NASDAQ:COST) sells off on weak August same-store sales

Sep 1, 2016 at 12:01 PM
facebook X logo linkedin


Roughly two months ago, strong sales numbers for June sent retail stock Costco Wholesale Corporation (NASDAQ:COST) soaring. Since then, the stock has given back all of those gains -- and then some -- with the company's poorly received same-store sales for August helping to finally close the gap. The news has COST 3.2% lower at $156.83, and back in the red on a year-to-date basis. Meanwhile, COST options traders are responding in a big way, with volume running in the 98th annual percentile. 

Despite COST's slide, calls have the edge over puts today -- though volume for both is running at several times the respective intraday norms. The most popular option overall is the front-month September 160 call, with data hinting at a mix of buy- and sell-to-open activity. For buyers, the goal is for the shares to rebound back above $160 by expiration the night of Friday, Sept. 16, while sellers are betting on COST stock holding below the strike. 

On the put side, the September 155 strike has seen the most action, while the weekly 9/2 157.50 strike is close behind. It looks as if traders may be selling to close positions, possibly taking profits ahead of the respective expiration dates. 

Longer term, put buying has been the go-to strategy recently at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). COST has posted a 10-day put/call volume ratio of 1.57 across these exchanges, which tops 84% of the past year's readings. Furthermore, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.29 is just 5 percentage points from a 12-month high. This all points to an extremely unusual interest in COST put options of late. 

Outside the options pits, pessimism has actually been waning toward the shares. Specifically, short interest plummeted by 21% in the last two reporting periods. However, going by COST's average daily trading volumes, six days' worth of buying power is still on the sidelines. 

While today's sell-off puts Costco Wholesale Corporation (NASDAQ:COST) on the wrong side of breakeven for the year, the shares remain comfortably above their lows below $140, last touched in May. As such, analysts have remained upbeat, with 10 of 15 calling COST stock a "buy" or a "strong buy," and zero rating it a "sell." 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI