Costco (COST) Options Signal Bullish Bias at $880–$950: Here’s How to Position for a Potential Rally or Hedge Downside

• Costco’s price dropped 0.7% to $851.61, trading below its 30D, 100D, and 200D moving averages.
• Options data shows heavy call open interest at $880, $950, and $1000 (expiring this Friday), while puts cluster at $850 and $845.
• A block trade sold 80 puts at $942.50 (expiring Sept 26), hinting at bearish positioning despite bullish options flow.

Here’s the takeaway: Costco’s options market is torn between cautious optimism and bearish hedging. While calls dominate open interest, technicals and a key block trade suggest volatility ahead. Let’s break it down.

Bullish Calls vs. Defensive Puts: What the Options Flow Reveals

The options chain tells a story of conflicting signals. For this Friday’s expiration, COST20251219C880 and COST20251219C950 have the highest open interest (2,300 and 2,235 contracts, respectively). This suggests traders are betting on a rally above $850.42 (lower Bollinger Band) to test the 30D MA at $897.93.

But don’t ignore the puts. COST20251219P850 and COST20251219P845 dominate put open interest (2,029 and 1,853 contracts), indicating hedging activity as the stock nears its lower Bollinger Band. The put/call ratio of 0.74 (calls > puts) leans bullish, but the block trade selling COST20250926P942.5 (80 contracts) adds a layer of caution. This trade could signal institutional bearishness, possibly hedging long positions or anticipating a pullback.

News Flow: Earnings Beat vs. Valuation Concerns

Costco’s Q1 earnings beat ($4.34 vs. $4.27) and 8.3% revenue growth are positives, but analysts are split. Institutional investors like Talbot Financial increased stakes, yet Guggenheim called the stock “overvalued” at 47.37 P/E. Membership renewal rates (92.2% in the U.S.) are resilient, but digital adoption is dragging them down slightly.

The key tension here is valuation vs. fundamentals. Costco’s membership income ($1.329B) and executive membership dominance (74.3%) are strengths, but analysts worry about sustaining margins amid macroeconomic headwinds. This duality explains the options flow: bulls target a rebound off oversold RSI (22.84), while bears hedge against a breakdown below $849.32 (intraday low).

Actionable Trade Ideas: Calls, Puts, and Stock Entries

1. Bullish Call Play: Buy COST20251219C880 if Costco closes above $850.42 today. Target a move to $890.09 (middle Bollinger Band) before Friday’s expiry.
2. Bearish Put Hedge: Buy COST20251219P850 if the stock breaks below $849.32. This protects against a drop toward the 200D MA at $913.38.
3. Stock Entry: Consider buying Costco near $850.42 (lower Bollinger Band) with a stop-loss at $849.32. A breakout above $858.45 (intraday high) would validate the bullish case.

Volatility on the Horizon: Balancing Optimism and Caution

Costco’s options market is a tug-of-war between bulls eyeing a rebound and bears bracing for a pullback. The RSI’s oversold level and strong membership metrics lean toward a short-term bounce, but the block trade and elevated valuation add risk.

Your best bet? Stay nimble. Use the $880–$950 call strikes to capitalize on a rally, but keep puts like COST20251219P850 ready if the stock stumbles. Either way, watch the $850.42 level—it’s the line in the sand between a rebound and a breakdown.