Costco (COST) Options Signal Bullish Setup at $900 as Oversold RSI and Earnings Beat Fuel Near-Term Optimism

• Costco’s Q1 earnings beat and upgraded analyst ratings (now 18 ‘Buy’ vs. 13 ‘Hold’) are fueling short-term optimism.
• Options market shows heavy call open interest at $900 (1,673 contracts) and bearish puts at $830 (1,418 contracts) ahead of Friday’s expiry.
• RSI at 17.42 suggests extreme oversold conditions, while a bullish engulfing candle hints at a potential rebound.

Here’s the deal: The options market and technicals are pointing to a high-probability short-term rally for Costco. But the long-term bearish trend means traders need to balance greed with caution.

Bullish Pressure at $900, Bearish Floor at $830

The options chain tells a clear story. For this Friday’s expiry (Dec 26), call open interest peaks at $900 (COST20251226C900), while puts dominate at $830 (COST20251226P830). This suggests a tug-of-war between bulls targeting a $20+ move and bears bracing for a $20 drop. The put/call ratio of 0.77 (favoring calls) reinforces the near-term bullish bias.

But don’t ignore the bearish block trade: A massive 80-lot sale of puts at $942.50 (COST20250926P9425) hints institutional players are hedging against a deeper decline. That could create a support floor near $900 if the stock dips.

Earnings Beat and Digital Wins Outweigh Tariff Risks

Costco’s Q1 results—$4.50 EPS vs. $4.27 expected—show it’s navigating inflation better than rivals. The $16.2B cash hoard and 14% membership fee growth are tailwinds. Plus, the new membership verification system and Kirkland Signature expansion are real revenue drivers.

Yet the lawsuit against Trump-era tariffs adds noise. If the court rules against Costco, expect a short-term selloff. But the company’s $17B cash pile and planned dividend (rumored $12–$15/share) should cushion any blow.

Trade Ideas: Calls at $900, Puts at $830, or a Core Position

• Options Play 1: Buy COST20251226C900 (this Friday expiry). If Costco breaks above $876 (intraday high), the $900 call could see 20%+ gains before expiry.
• Options Play 2: Buy COST20260102C905 (next Friday expiry) for a longer runway. The $905 strike aligns with the 200D MA at $952, giving room for a gradual rally.
• Stock Play: Enter a core position near $870–$875 with a stop-loss at $850 (support level). Target $900 first, then $920 (Bollinger Upper Band at $931.69).

Volatility on the Horizon

The next 72 hours will be critical. If Costco holds above $858.35 (intraday low), the bullish case strengthens. But a break below $850 could trigger a test of the $836.70 Bollinger Lower Band. Either way, the options market is pricing in a $20–$30 range shift—so pick your side and stick to tight risk management.

Bottom line: Costco’s fundamentals are solid, but the options data and technicals scream ‘short-term volatility.’ Play it like a chess game—attack with calls at $900, but keep a put at $830 ready just in case.