$COST Options Intelligence

🎯 SELL COST 2025-10-31 900/910 PUT SPREAD

I recommend a bull put spread expiring October 31, 2025, because the term structure shows near-term options are fairly valued with clean IV (~17.1%) near the 18.1% baseline volatility, indicating neutral pricing. Costco’s current stock price is $939.96, well above the 910 strike, providing a strong support buffer. The high IV rank (100%) and elevated implied volatility (43.7%) favor premium selling strategies. Institutional buying today indicates some underlying support, while technicals (RSI 51, price above 20-day MA) suggest a neutral to mildly bullish stance. The next earnings are December 11, so this expiration is well before earnings, avoiding earnings volatility risk.

Trade Details:

Sell COST Oct 31 2025 910 Put at approx. $18.00 bid
Buy COST Oct 31 2025 900 Put at approx. $13.00 ask
Net Credit: ~$5.00 per share ($500 per contract)
Stock Price: $939.96

📊 Trade Metrics

• Max Profit: $500 (net credit received)
• Max Risk: $500 (spread width $10 - $5 credit)
• Breakeven at Expiry: $905 (910 strike - $5 credit)
• Probability of Profit: High, as stock is currently $940 and support is strong above 910
• Days to Expiration: 7 days (short-term, capturing near-term premium decay)

📈 Term Structure & Volatility Analysis

• Baseline 90-day Volatility: 18.1%
• Clean IV Oct 31: 17.1% (near baseline, fair value)
• Market IV: 43.7% (high, favors selling premium)
• IV Rank: 100% (very high, premium expensive)
• Earnings Date: Dec 11, 2025 (trade expires well before earnings)
• Expected Daily Move: ±$25.85 (2.75%) — stock well above strike, buffer for downside

📈 Greeks & Volatility

• Delta (short 910 put): approx. -0.10 to -0.15 (low risk of assignment)
• Theta: Positive (time decay benefits seller)
• Vega: Negative (position benefits if IV contracts)

🎯 Why This Trade

The term structure shows near-term IV close to baseline, so options are fairly priced, but the overall IV rank is very high, making premium selling attractive. The stock price at $939.96 is well above the 910 strike, supported by recent institutional buying and solid fundamentals including EPS beat last quarter and revenue growth. Technicals are neutral to mildly bullish (RSI 51, price above 20-day MA). The next earnings event is December 11, so this trade avoids earnings volatility risk by expiring early November. The trade captures fast time decay and collects premium with defined risk, suitable in a market expecting limited near-term downside. The dividend ex-date is not imminent, so no dividend risk.

📊 Pro Analysis

• Institutional buying today supports price stability
• P/E ratio high (~51) but stock near support at 933.80 volume level
• Technicals neutral (RSI 51, MACD bullish crossover)
• Sector peers mixed but Costco shows steady earnings growth
• Market regime: Fed rate decision in 5 days may add volatility, but this short-term spread limits risk
• Volume and open interest in puts at these strikes support liquidity

🔍 Earnings Date Check

Earnings on December 11, 2025; trade expires October 31, 2025 — ✅ Expires BEFORE earnings to avoid earnings volatility

💡 Trade Management

• Entry: Place limit order to SELL 910 Put / BUY 900 Put spread for $5.00 credit
• Target: Keep full credit or buy back for 50% profit (~$2.50)
• Stop: Consider closing if stock falls below $905 (breakeven) or volatility spikes sharply
• Time Stop: Close 1-2 days before expiration to avoid assignment risk

🔒 Pricing Validation

• 910 Put intrinsic value: $0 (OTM)
• 900 Put intrinsic value: $0 (OTM)
• Spread intrinsic value: $0
• Spread net credit $5.00 is above intrinsic value, valid credit spread

🔍 Market Overview

Costco trades at $939.96, slightly below its 50-day MA of $945.96 and well below the 200-day MA of $972.80, indicating some medium-term bearish pressure but short-term stability. The RSI at 51 indicates neutral momentum, and MACD is bullish, suggesting potential for sideways to modest upside movement. Fundamental strength with recent EPS beat and revenue growth supports a stable outlook. Institutional buying today by Blue Sky Capital and Cardinal Point Capital suggests confidence at current levels. The high IV rank (100%) and elevated market IV (43.7%) favor premium selling strategies. Upcoming Fed decision in 5 days could increase market volatility, so a defined-risk spread is prudent. Dividend ex-date is October 31, 2025, so this trade captures premium before dividend impact. The max pain point for options is around 1100, far above current price, indicating limited downside pressure near strike 910.

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Confidence Level: Moderate to High
Risk Assessment: Defined risk of $500 per contract; downside risk limited to $10 spread width minus premium collected. Probability of profit is high given stock price and support levels. The short duration reduces exposure to unexpected events.

This trade balances premium collection with conservative risk management in a high IV environment and neutral technical/fundamental backdrop.