Costco's Options Signal a Bearish Battle at $940: Here's How to Position for the Upcoming Volatility

• Costco (COST) trades at $920.54, up 0.89% but stuck below key moving averages.
• Options market shows heavy put open interest at $905 and call frenzy at $950 ahead of Friday expiry.
• A $942.5 put block trade hints institutional players are eyeing a price floor.

Here’s the thing: COST’s options market is screaming about a potential price war at $940. With technicals pointing lower and options positioning showing a bearish skew, this stock is at a crossroads. Let’s break down what the data tells us—and how to trade it.

The Options Imbalance: A Bearish Crowd with Bullish Hopes

Take a look at the OTM options: puts are dominating at the $905 strike (1,490 open interest), while calls are clustered at $950 (1,201 OI). This isn’t just noise—it’s a crowd betting on a sharp drop or a last-ditch rally. The put/call ratio of 0.91 (favoring calls slightly) masks the bigger picture: 70% of put open interest is concentrated below $905, a level 11% below current prices. That’s the kind of positioning you see when investors expect a meaningful correction.

But here’s the twist: the $950 call strike has 1,201 contracts in play this Friday. Why? Because some traders think COST could snap back toward its 30D MA at $931.94 if support holds. The block trade selling 80 puts at $942.5 (expiring Sept 26, 2025) adds another layer. This whale isn’t just hedging—they’re likely trying to lock in a purchase price if the stock crumbles.

The Silence of the Headlines

No major news is driving this setup, which means the market is reacting purely to technicals and options positioning. Without earnings or product announcements to sway sentiment, investor behavior is being dictated by charts and strike prices. That’s both a risk and an opportunity: without fundamental catalysts, momentum could stall if the stock hits a key level. But it also means the options market is the best indicator of where smart money is moving.

Actionable Trade Ideas: Play the Battle for $940

For options traders:

• Sell the $905 puts (expiring Friday) if you think COST won’t break below $904 (the lower Bollinger Band). The 1,490 OI at this strike means there’s liquidity to work with, and a $920.54 stock price gives you a buffer.
• Buy the $950 calls (Friday expiry) as a speculative bet on a rebound. With RSI at 37.19 (oversold territory), a bounce toward $930 could ignite these contracts.

For stock traders:

• Consider entries near $904 if the lower Bollinger Band holds. Set a stop just below $900, where put open interest spikes.
• Target $930–$943 as a short-term ceiling. The 30D MA at $931.94 and the block trade’s $942.5 strike form a tight cluster—break above that, and the bearish narrative cracks.

Volatility on the Horizon: What to Watch

The next 72 hours will be critical. If COST closes below $910 (the intraday low), the put-heavy options crowd could force a cascade lower. But a rebound above $925 would invalidate the bearish case and turn those $950 calls into fireworks. Either way, the 200D MA at $972.64 is a distant ceiling—this stock isn’t going anywhere near that in the short term.

Here’s the bottom line: COST is caught in a bearish trap, but the options market isn’t pricing out a rebound. Play the $940 battleground with clear entry/exit rules, and you’ll be positioned for whatever comes next.