Costco's Options Signal a Bearish Shift: Key Strikes and Trade Setups at $905, $935

• Costco (COST) trades at $912.81, down 0.66% with bearish technicals and a put/call ratio of 0.91 (calls edge puts).
• Options data shows heavy put open interest at $905 and $900, while calls cluster at $935 and $940.
• A $942.5 put block trade (80 contracts) hints at institutional bearishness ahead of Sept 2025.
• Recent news: Earnings beat but abortion pill exit and product recall add reputational risk.

The numbers don’t lie: COST’s options market is painting a clear picture of downside bias. With puts dominating near $900 and calls clustering above $935, traders are hedging for a potential breakdown below key support. Let’s unpack what this means for your strategy.The Options Imbalance: A Bear Case in the Making

Costco’s options chain tells a story of cautious pessimism. The top OTM puts for Friday expiration are jammed at $905 (OI: 1,445) and $900 (OI: 1,291), while calls peak at $935 (OI: 1,389) and $940 (OI: 1,257). This isn’t just noise—it’s a structural setup.

Think of it like a seesaw: heavy put weight at $900 suggests traders are bracing for a drop to that level, while calls above $935 represent fading long bets. The block trade selling 80 puts at $942.5 (expiring Sept 2025) adds another layer. That’s not just retail money—it’s smart money betting COST won’t hold above $942.50 into next year.

Risks? If COST rallies above $930.34 (Bollinger middle band), the call-heavy zone could ignite a short-covering rally. But with RSI at 45.68 and MACD negative, the odds favor a test of the $904.85 lower Bollinger band first.News Flow: Earnings Can’t Outrun Reputational Headwinds

Costco’s Q4 results were solid—$5.87 EPS and 8% sales growth—but the headlines stealing attention are less rosy. The abortion pill exit aligns with political tailwinds for some, but risks alienating others. Meanwhile, the sparkling water recall adds a quality-control asterisk to the brand’s reputation.

Here’s the rub: Earnings can prop up the stock temporarily, but the product recall and social stance could erode consumer trust over time. Options traders seem to agree—those puts at $900 aren’t just for show. Investor sentiment is fraying at the edges, and that often precedes price action.

Actionable Trade Ideas: Where to Play This Setup

For options players, the most compelling setup is a short put spread using the Friday $905 and $900 strikes. Sell the $905 puts (OI: 1,445) and buy the $900 puts (OI: 1,291) to capture premium while capping risk. If COST breaks below $905, the $900 long acts as a buffer.

Alternatively, a bear call spread using the $935 and $950 calls (OI: 1,389 and 1,012) could work. Sell the $935 calls and buy the $950 calls to profit if COST stays below $935. Both strategies align with the technical bias and options flow.

For stock traders, consider shorting near $910.91 (intraday low) with a stop above $920.00. The target? A drop to the $904.85 lower Bollinger band, with a secondary case testing the 200D MA at $972.66 if things go sideways.

Volatility on the Horizon: What to Watch

Costco’s options market is primed for a directional move. The puts at $900 and calls at $935 form a tight trading range—break one, and momentum could accelerate. Keep an eye on the Sept 2025 block trade at $942.5; if COST holds above that, the bear case weakens. But if it cracks, the puts at $905 could become a self-fulfilling prophecy.

This isn’t a binary bet. It’s a calculated setup where options sentiment, technical levels, and news flow all point to a high-probability short-term downtrend. The key? Stay nimble—position size accordingly and re-evaluate if COST surprises to the upside. After all, even the best-laid plans need a Plan B.