Costco’s Put-Call Parity at $900–$1000: A Risk-Reversal Setup for Short-Term Volatility

• Costco (COST) trades at $918.81, down 2.6% from its previous close, with intraday lows near $905.05.
• Options data reveals a 1.02 put/open interest (OI) ratio, with heavy OI at $900 puts and $1000 calls ahead of Friday’s expiry.
• Block trading highlights a $942.5 put sale (80 contracts) ahead of the 2025-09-26 expiry, signaling potential support near $940.

The confluence of bearish technicals, skewed options positioning, and mixed news flow suggests downside risk in the near term, but a potential rebound if support holds. Below, we dissect the options-driven narrative and actionable strategies for traders.

Bearish Sentiment Locked in at $900–$1000: Decoding the Options Imbalance

The options chain for Friday’s expiry shows a stark imbalance: 2,983 OI at the $900 put (the highest among OTM puts) versus 3,057 OI at the $1000 call (top OTM call). This suggests institutional players are hedging against a sharp drop or positioning for a rebound above $1000. The put/call ratio of 1.02 (put OI vs call OI) indicates a roughly neutral sentiment, but the concentration of OI at these strikes implies a risk-reversal trade—a bet on volatility between $900 and $1000.

Notably, a block trade of 80 contracts at the COST20250926P942.5 put (expiring Sept 26, 2025) adds nuance. This strike is just below the 30D support level ($943.28–$944.395), suggesting a floor may form near $940. However, the heavy OI at $900 puts indicates deeper bearish conviction, with potential for a breakdown if the stock closes below $905.05 (intraday low).

Contradictory News Flow: Earnings Strength vs. Valuation Concerns

Costco’s Q4 results were robust: 8% net sales growth, $5.87 EPS, and 35 new warehouse plans for 2026. Yet, the stock fell post-earnings due to valuation skepticism. Analysts at Morgan Stanley and UBS highlighted concerns about peak margins and stretched P/E ratios, while the decision to stop selling mifepristone in U.S. pharmacies has sparked reputational risks. These factors create a mixed narrative: strong fundamentals but short-term profit-taking pressure.

The options data aligns with the bearish news. Heavy OI at $900 puts reflects anticipation of a pullback to align with valuation concerns, while the $1000 call OI suggests a counter-bet on earnings-driven optimism. The block trade at $942.5 further reinforces the idea that institutional investors are hedging against a near-term dip.

Actionable Trade Ideas: Short-Term Volatility Plays

For options traders, the most compelling setups are:

• Sell the $900 put (COST20250926P900) expiring Friday: With 2,983 OI, this strike is a magnet for liquidity. If the stock holds above $900, the put could decay rapidly, offering a high-probability short-term trade.
• Buy the $1000 call (COST20250926C1000) expiring Friday: For a bullish bet, this strike offers leverage if Costco rebounds above $918.81. The RSI at 40 suggests oversold conditions, increasing the likelihood of a bounce.

For stock traders, consider:

• Entry near $943.28 (30D support): If the stock stabilizes here, a long position with a stop below $932.30 (lower Bollinger Band) could target $976.29 (200D resistance) or $979.42 (100D MA).
• Short near $927.47 (intraday high): A breakdown below $905.05 could target $900, with a stop above $927.47.

Volatility on the Horizon: Balancing Risk and Reward

The technicals and options data paint a picture of short-term bearish bias but with a potential rebound if Costco holds key support levels. The $900–$1000 range is critical: a close below $900 would validate the bearish case, while a rebound above $927.47 could trigger a rally toward $976.29. Traders should monitor the 200D MA ($975.73) as a long-term resistance level and watch for follow-through volume on any directional move.

In summary, Costco’s options activity and technicals suggest a high-volatility environment in the near term. Positioning around the $900–$1000 range offers opportunities to capitalize on both downside risk and a potential rebound, provided traders manage risk with tight stops and dynamic exits.