Costco's Options Signal a Bearish Battle at $880: How to Hedge or Capitalize on the Downside Risk

• Costco (COST) trades at $884.77, down 1.58% from its 52-week high of $968.23
• Options data shows 1,843 puts at $835 and 1,444 puts at $870 with the most open interest
• Technical indicators confirm a bearish setup with RSI at 34.5 and MACD below zero

Here's what's happening: The options market is whispering a bearish story while the stock fights to stay above critical support. If you're holding COST shares, today's data gives you a roadmap to either protect your position or position for a potential short-term move. Let's break it down.

The Bearish Options Setup at $880

The options chain tells a clear story. For this Friday's expiration (Nov 28), the $835 put has 1,843 open contracts—the highest of any strike. That's not just noise; it's a price level where big money is betting on a significant drop. The $870 put isn't far behind with 1,444 open contracts, creating a cluster of bearish sentiment around the $835–$870 range.

But here's the twist: The $940 call has 782 open contracts, suggesting some bulls are still hedging for a rebound. The block trade of 80 puts at $942.50 (COST20250926P942.5) adds another layer. This isn't just retail panic—it's institutional players positioning for a sharp move lower.

The News Doesn't Fully Offset the Bear Case

Costco's Q4 earnings and e-commerce growth are impressive, but the market is pricing in risks. The membership fee hikes in the UK and the stock's 49.2x P/E ratio (vs. S&P 500's 20.9x) create a tug-of-war. Institutional investors like Legal & General are buying, but others are trimming. The options data suggests the bears are winning this round.

Actionable Trade Ideas for Today

For options traders:

• Bearish Play: Buy the $880 puts expiring Nov 28 (COST20251128P880). The stock is already testing this level, and a break below $884.64 (today's low) could trigger a rush to these puts.
• Bullish Counter: If you're bullish on Costco's long-term story, buy the $940 calls expiring Dec 5 (COST20251205C940). This gives you time for the stock to rebound from its 30D support at $922.79.

For stock traders:

• Entry Near $885: If the stock holds above $884.64, consider buying dips near $885 with a stop-loss below $880. The 200D MA at $968.23 is a long-term ceiling, but short-term support is at $922.79.
• Short-Sellers: Target entries between $870–$835, where the bulk of put open interest resides. Use the $880 level as a dynamic stop.

Volatility on the Horizon: Navigating Costco’s Crossroads

The next 48 hours will be critical. If Costco closes below $880, the $835 level becomes a hard target. But don't ignore the bulls: The $940 call open interest and institutional buying suggest a rebound isn't out of the question. This is a stock at a crossroads—where fundamentals and sentiment are pulling in opposite directions.

Your move depends on your risk tolerance. If you're bearish, the options market has already priced in a drop to $835. If you're bullish, the $940 calls give you a shot at a rebound while limiting downside. Either way, the next few days will tell us whether Costco's bearish trend is a temporary dip or the start of a deeper correction.