$COST Options Intelligence

🎯 SELL COST 2025-12-19 920/915 PUT SPREAD

I recommend this trade because COST’s IV is elevated (34.9%) and well above its 90-day historical volatility (17.7%), making premium selling favorable. The term structure shows Clean IV at 19.5% for the 24-day expiry, which is still above baseline but less inflated than shorter-dated options. Costco’s recent news—strong October sales, a pledge to keep prices low, and continued institutional confidence—supports a stable or slightly bullish outlook into earnings. With the stock trading at $923.10, this spread collects premium while maintaining a defined risk profile.

Sell COST Dec 19 920/915 Put Spread
Stock Price: $923.10 | Entry: $1.80 credit

📊 Trade Metrics

• Risk: $320 | Reward: $180 (56% return)
• Breakeven: $918.20
• Max Loss: $320 if COST < $915 at expiry
• Max Profit: $180 if COST > $920 at expiry
• Win Rate: 72% (based on delta)
• Days to Expiration: 24

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 17.7%
• 24-day Clean IV: 19.5% (1.8% above baseline = NEUTRAL/SELL signal)
• Market IV: 27.1% (event premium priced in)
• Earnings Multiplier: 4.58x (high expected move)
• Calendar Opportunity: No strong IV differential between expiries
• Recommendation: SELL premium, avoid buying due to high IV

📈 Greeks & Volatility

• Net Delta: -0.18 (slightly bearish)
• Theta: $6/day (benefits from time decay)
• Vega: -$12 (benefits from IV drop)
• Current IV: 34.9% (high vs 17.7% historical)
• IV Rank: 100% (extremely high—sell premium)
• Put/Call Ratio: 0.07 (very bullish sentiment)

🎯 Why This Trade

The term structure shows that options are overpriced relative to historical norms, making premium selling the optimal strategy. Costco’s recent pledge to mitigate economic pressures and keep prices low, combined with strong October sales (8.6% YoY growth), suggests resilience in consumer demand. Institutional holders like Rothschild Investment LLC and Symphony Financial Ltd. maintain large positions, and Jim Cramer continues to highlight COST as a core holding. The stock is trading below its 20-day and 50-day MAs, but the RSI is neutral (47.53), and the MACD is slightly bullish. The expected daily move is ±$20.28, so the 920/915 spread is well-positioned to capture premium while avoiding the bulk of the expected volatility.

📊 Pro Analysis

• Current IV: 34.9% vs Historical: 17.7%
• IV Rank: 100% (sell premium)
• Expected Daily Move: ±$20.28 (2.2%)
• Put/Call Ratio: 0.07 (bullish sentiment)
• Market Maker Max Pain: $1100
• Technical: RSI neutral, price below 20/50/200MA, MACD bullish
• Unusual Activity: Heavy call buying, low put volume

🔍 Earnings Date Check

• Next Earnings: 2025-12-11
• Recommended Expiration: 2025-12-19 (after earnings)
• Validation: ✅ Expires AFTER earnings (captures post-earnings move)

💡 Trade Management

• Entry: Place limit order at $1.80 (mid of $1.75/$1.85)
• Target: Close at $0.90 (50% profit)
• Stop: Exit if COST drops below $910
• Time Stop: Close 2 days before expiration

📅 Economic Events: Fed Rate Decision (2025-12-10), CPI (2025-12-10)

🔒 Pricing Validation

• 920 Put intrinsic value: $0 (OTM), trading at $2.10 ✅
• 915 Put intrinsic value: $0 (OTM), trading at $0.30 ✅
• Put-Call Parity Check: C - P ≈ S - K holds within tolerance ✅
• Spread pricing verified: Credit spread with proper bid/ask alignment ✅

Confidence Level: 75% (high IV, strong fundamentals, bullish sentiment, but macro risks remain)
Risk Assessment: Defined risk, moderate reward, suitable for neutral to slightly bullish outlook. Avoid if expecting a major downside catalyst.