Costco (COST) Options Signal $900 Put Pressure Amid Earnings Optimism: A Bearish Breakdown for Traders

• Costco’s stock plunges 1.99% to $924.52 amid a bearish engulfing candle and oversold RSI (40.00), signaling potential short-term weakness.
• Options data reveals heavy open interest in OTM puts at $900 (OI: 2,983) and calls at $1,000 (OI: 3,057), with a near-even put/call ratio (1.02) masking aggressive downside positioning.
• A $942.50 put block trade (80 contracts) hints at institutional bearishness, while Q4 earnings beat estimates but face reputational risks from mifepristone exit.

A confluence of bearish technicals, skewed options positioning, and mixed corporate news paints a nuanced picture for Costco (COST). While the stock’s 8.1% annual sales growth and 35 new warehouse plans suggest long-term resilience, immediate downside risks crystallize around $900–$920 support levels. Traders must balance short-term volatility with strategic entry points in this pivotal pre-earnings juncture.

Bearish Imbalance in OTM Options and Whale Activity

The options market’s current setup reveals a stark bearish bias. For Friday expiration, the $900 put (OI: 2,983) dwarfs its nearest counterpart at $880 (OI: 2,355), while the $1,000 call (OI: 3,057) remains the top bullish bet. This $100-wide strike disparity suggests institutional players are hedging against a sharp pullback, with the $900 level acting as a critical psychological floor. The put/call ratio of 1.02 further underscores balanced but aggressive positioning, as bearish open interest (166,372) slightly edges out bullish (163,249).

A notable block trade—80 contracts of the COST20250926P942.5 put—adds urgency. This $942.50 strike, just above the 30D support range (943.28–944.40), indicates whales are locking in downside protection ahead of the September 26 expiration. While this could stabilize the stock near $940, the broader OTM put distribution implies deeper selling pressure if the $920 level (next support) fails.

Corporate News: Growth vs. Reputational Headwinds

Costco’s Q4 results—$84.4B in sales and $5.87 EPS—exceeded expectations, driven by membership growth and e-commerce gains. However, the decision to stop selling mifepristone introduces reputational risk, particularly in a polarized market. While CEO Ron Vachris emphasizes digital upgrades and 35 new warehouses, the PR fallout could amplify volatility, especially if consumer sentiment shifts.

This duality creates a trading paradox: strong fundamentals support a rebound above the 200D MA ($975.73), but near-term sentiment remains fragile. The $900 put-heavy positioning aligns with technical indicators (MACD -4.46, RSI 40.00) suggesting a continuation of the 1.99% intraday drop. Traders must weigh the company’s expansion optimism against the immediate bearish momentum.

Actionable Trade Setups: Short-Term Bearish Plays

For options traders, the COST20250926P900 put (Friday expiration) offers a high-probability play. With 2,983 contracts open and the stock trading at $924.52, this strike has a 78% probability of profit if the stock closes below $900. A secondary opportunity exists in the COST20250926P920 (OI: 1,954) for those seeking a closer-to-the-money hedge.

Stock traders should consider shorting near $925 with a stop-loss above the 30D MA ($958.43). A successful short would target the lower Bollinger Band ($932.30) and then the 200D support ($976.29). For bullish contrarians, a long entry could be triggered if the stock rebounds above $944.40, with a target at the 100D MA ($979.42).

Volatility on the Horizon: Navigating the Crossroads

Costco’s stock sits at a technical and thematic crossroads. The bearish engulfing pattern and oversold RSI suggest a near-term test of $900–$920, while the options market’s heavy put positioning reinforces this scenario. However, the company’s robust earnings and expansion plans provide a floor, particularly if membership growth outpaces expectations.

Traders must remain agile. A break below $900 could trigger a cascade of stop-loss orders, extending the decline toward the lower Bollinger Band. Conversely, a rebound above $944.40 would invalidate the bearish case, shifting focus to the 100D/200D MA as resistance. With expiration dates looming (Friday and next Friday), time is a critical factor—position sizing and risk management will define success in this high-velocity environment.