COST – Costco Wholesale Corp. – September and October contract call options on the operator of membership warehouses are active this morning on news the firm’s total revenue for the four weeks ended August 29 increased 9% to $5.9 billion. Costco also revealed that stores open at least a year experienced a 7% increase in revenue in August, which handily beat average analyst expectations of a 4.2% increase. Shares of the wholesale club operator rallied as much as 1.8% in morning trading to secure an intraday high of $58.83. Some investors appear to be initiating bullish stances on the stock, while others may be taking profits off the table. Traders expecting COST’s shares to climb higher ahead of expiration in September picked up approximately 1,800 calls at the September $60 strike for an average premium of $0.29 each. Call buyers are poised to profit should Costco’s shares rally another 2.5% over today’s high of $58.83 to trade above the average breakeven price of $60.29 by expiration. The majority of the 1,800 in-the-money calls exchanged at the October $57.5 strike were sold at an average premium of $2.41 apiece. Upon examining open interest at that strike, it looks like call sellers may have originally purchased the contracts for an average premium of $1.38 back on August 30, 2010, ahead of the release of August sales data. In this scenario, investors enjoy average net profits of $1.03 per contract. All-in-all, options traders displayed a clear preference for COST calls today, as more than 7.7 calls changed hands for each single put option in action thus far in the session.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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