Costco (COST) Options Signal $870 Floor as Puts Dominate: Here's How to Play the Downside Risk

• Costco’s stock (COST) trades at $895.24, up 1.03% today but below its 200-day MA of $967.44.
• Options data shows puts dominate at $835–$880, with 1,882 OI at $835 (this Friday’s expiry).
• Block trading sold 80 puts at $942.50 expiring Sept 26, hinting at potential support near $940.
• RSI at 20.9 and MACD -10.35 confirm a bearish technical setup.

Here’s the thing: Costco’s options market is screaming about a potential $870 floor. While the stock has rallied slightly today, the technicals and options data tell a bearish story. Let’s break down why this could be a pivotal moment for traders.

The Put-Call Imbalance and Block Trade Signals

The options chain is a goldmine of sentiment. Right now, puts dominate at key levels. For this Friday’s expiry, the $835 put has 1,882 open contracts—nearly double the nearest call at $910 (1,675 OI). That’s not just noise; it’s a crowd betting the stock will drop below $880.

But here’s the twist: A block trade sold 80 puts at $942.50 (COST20250926P942.5) expiring in September. That’s a bearish signal, but it also suggests some big players see a floor near $940. If the stock breaks below $912.29 (30D support), watch for a test of $884.54 (lower Bollinger Band).

The put/call ratio of 0.91 (put OI vs. call OI) isn’t extreme, but it’s enough to signal caution. Calls are clustered around $905–$910, which could mean some bullish interest if the stock rebounds. But for now, the puts are louder.

Company News: Mixed Bag for Long-Term Bulls

Costco’s recent news is a mixed bag. On the positive side, the company is expanding e-commerce, boosting membership fees (up 13.6% YoY), and beating earnings estimates. The $5.87/share Q4 EPS beat and plans to open 28 new warehouses in 2025 are solid fundamentals.

But there’s a dark cloud: A class-action lawsuit over Kirkland Signature tequila and a product recall for portable chargers could dent consumer trust. The legal risks are real, and while Costco’s CFO says inflationary pressures are easing, the stock’s technicals don’t reflect that optimism.

Investor perception is key here. Institutional buyers like Prudential Financial are piling in, but retail traders might be skittish about the legal headlines. If the stock breaks below $884.54, the $870–$880 range could see heavy selling pressure.

Actionable Trade Ideas: Play the Put Dominance

For options traders, the puts at $835 and $870 (this Friday’s expiry) are the most attractive. If you’re bearish, consider selling the COST20251128P870 at $870. The high OI (1,181 contracts) suggests liquidity, and a move below $884.54 could trigger a cascade.

For a more conservative play, buy the COST20251205P880 (next Friday’s expiry) at $880. It’s cheaper than the $835 put and offers a better risk/reward if the stock drops below $884.54.

Stock traders: Consider entering near $884.54 (lower Bollinger Band) if the stock holds above $885.19 (intraday low). A break below $884.54 would target $870–$835. If you’re bullish, the 30D support at $912.29 is a key level to watch. A rebound here could trigger a short-term rally to $914.33 (middle Bollinger Band).

Volatility on the Horizon

The next 72 hours will be critical. If Costco’s stock closes above $895.72 (intraday high), the bearish bias weakens. But a close below $885.19 could accelerate the downtrend. Keep an eye on the $940 call (COST20251205C940) as a potential short-term rally catalyst.

In the long run, Costco’s fundamentals are strong, but the options market is pricing in near-term risks. This isn’t a death knell for the stock—it’s a chance to play the volatility. Just don’t ignore the puts; they’re telling a story the charts already confirm.