Costco (COST) Put/Call Imbalance and $900 Put OI Signal Bearish Breakdown Play: Short-Term Downtrend Setup with Defined Risk-Reward

• Costco’s stock plunges 2.75% to $917.36 amid bearish candlestick patterns and a 1.02 put/call open interest ratio.
• Options data reveals heavy put open interest at $900 and $880, with block trades selling 80 puts at $942.50 ahead of September 2025 expiration.
• RSI at 40 and MACD bearish crossover suggest oversold conditions but confirm a potential short-term breakdown.

The confluence of bearish technicals, skewed options positioning, and strategic institutional activity paints a clear short-term bearish narrative for Costco. With the stock trading 3.5% below its 200-day moving average and options market sentiment heavily skewed to downside protection, traders should prepare for a potential breakdown below key support levels. Below, we dissect the options-driven signals, contextualize them with recent corporate developments, and outline actionable trade setups.

Bearish Put Dominance and Institutional Shorting at $942.50

The options chain for Costco reveals a stark bearish bias, with put open interest outpacing calls by a 1.02 ratio. For Friday expiration, the $900 put (OI: 2,983) and $880 put (OI: 2,355) dominate, while next Friday’s chain sees heavy interest at $900 (OI: 915) and $780 (OI: 439). This concentration suggests institutional positioning for a sharp decline, with the $900 level acting as a critical psychological threshold.

The most notable block trade—COST20250926P942.5—involves 80 puts sold at $942.50, expiring September 26, 2025. This strike is just 1.5% above the current price and sits near the 30-day support zone (943.28–944.39). The trade implies a bearish bet that Costco will fail to hold above this level, potentially triggering a cascade of stop-loss orders and further downward momentum.

While the call-heavy $1,000 strike (OI: 3,057) hints at limited upside potential, the sheer volume of put open interest signals a high probability of a short-term breakdown. Traders should monitor the $900 level closely; a close below this would validate the bearish case and open the door to a retest of the 200-day MA at $975.73 as resistance.

Corporate News: Earnings Beat vs. Valuation Concerns and Strategic Shifts

Costco’s Q4 2025 results—$84.4B in sales and $5.87 EPS—exceeded expectations, with e-commerce growth of 13.5% and plans to open 35 new warehouses. However, the stock’s 180% five-year rally has raised valuation concerns, with Seeking Alpha analysts warning of stretched multiples. The decision to stop selling mifepristone at U.S. pharmacies, while aligning with conservative market segments, risks alienating other customer groups.

These developments create a mixed narrative. On one hand, Costco’s membership growth and digital innovations (e.g., virtual waiting rooms, improved search features) reinforce its long-term appeal. On the other, the recent earnings dip in extended trading and institutional selling activity suggest short-term profit-taking. The options market’s bearish tilt aligns with the valuation skepticism in the news, particularly the “price tag too high to ignore” warnings.

Actionable Trade Setups: Short-Term Put Plays and Intraday ShortingOptions Strategy: For Friday expiration, the $900 put (OI: 2,983) offers a high-probability play. With the stock currently at $917.36, a $900 put would profit if Costco closes below $900 by Friday. For next Friday, the $920 put (OI: 1,954) is a safer bet, given its proximity to the 30-day support zone. Both strikes offer a risk-reward ratio of ~1:1.5 if the stock breaks below $900.Stock Positioning: A short trade could be initiated near $915–920, with a stop-loss above the 30-day resistance (943.28–944.39). Target zones include the lower Bollinger Band at $932.30 and the 200-day MA at $975.73. For a more conservative approach, consider a short strangle using the $900 put and $1,000 call, capitalizing on the wide range between put and call open interest.Volatility on the Horizon: Navigating the Bearish Breakdown

The combination of technical indicators (RSI at 40, bearish MACD crossover), options positioning, and institutional activity creates a compelling case for a short-term bearish trade. However, traders must remain vigilant: a rebound above the 30-day MA at $943.28 could invalidate the breakdown thesis. The key is to balance aggression with risk management—using stop-loss orders and scaling out of positions as the stock approaches critical levels like $900 and $880.

In the coming weeks, Costco’s ability to navigate macroeconomic headwinds (inflation, tariffs) and maintain its e-commerce momentum will be critical. For now, the data points to a defined short-term opportunity, with clear entry and exit levels. Traders who act decisively on this setup may capitalize on a market that’s pricing in pessimism ahead of the broader retail sector’s next move.