Costco Surges 3% on Bullish Options Flow and Strategic Retail Shifts—What’s Fueling the Rally?

Summary
• Costco (COST) surges 3.04% to $968.88, breaking above its 52-week high of $1,078.24
• Options data reveals 55% of recent trades are bullish, with $4.86 million in call volume
• Sector peers face store closures, while Costco expands digital and physical footprints

Costco’s intraday rally reflects a confluence of bullish options activity, strategic retail innovations, and sector-wide shifts. With the stock trading near its 52-week high and a dynamic options chain signaling aggressive call buying, the move underscores investor confidence in Costco’s ability to navigate a competitive retail landscape. The discount retail sector is under pressure from store closures, but Costco’s digital expansion and membership growth are creating a stark contrast.

Options Whales and Retail Resilience Drive Costco’s Rally
Costco’s 3.04% surge is fueled by a surge in bullish options activity, with $4.86 million in call volume outpacing $1.6 million in put volume. Institutional investors are targeting a $600–$1,200 price range over the past three months, reflecting confidence in Costco’s ability to sustain its premium valuation. Meanwhile, the company’s recent digital initiatives—such as same-day delivery in France and Spain—and its strong membership renewal rates (93% in the U.S.) are reinforcing its market position. The stock’s rise also contrasts with broader retail struggles, as competitors like Eddie Bauer and Saks Off 5th shutter locations, highlighting Costco’s unique value proposition.

Discount Retail Sector Faces Closures as Costco Outperforms
The discount retail sector is in turmoil, with Eddie Bauer, Saks Off 5th, and GameStop closing hundreds of stores. These closures reflect broader challenges in brick-and-mortar retail, driven by shifting consumer preferences and economic pressures. Costco, however, is bucking the trend. Its membership model, digital expansion, and high-margin offerings (e.g., Kirkland Signature) are creating a moat against competitors. While Walmart (WMT) also rose 3.93% today, Costco’s 3.04% gain underscores its premium positioning and investor optimism about its long-term growth trajectory.

Leverage the Rally: ETFs and Options for a Bullish Bet
• Leverage Shares 2X Long COST Daily ETF (COTG): 6.11% gain, ideal for short-term momentum
• Roundhill COST WeeklyPay ETF (COSW): 2.79% rise, offers structured income via weekly payouts
• 200-day MA: $951.40 (below current price), RSI: 56.57 (neutral), MACD: 18.57 (bullish divergence)

Costco’s technicals suggest a continuation of its bullish momentum. The stock is trading above its 200-day moving average and within a key support/resistance range (855.33–945.15). The RSI at 56.57 indicates neutral to bullish momentum, while the MACD histogram shows positive divergence. For options, two contracts stand out:

• COST20260206C960: Call option with 60.53% leverage, 24.21% implied volatility, and $646,367 turnover. Delta: 0.6348 (moderate sensitivity), Theta: -5.3053 (strong time decay), Gamma: 0.0137 (high sensitivity to price swings). This contract offers a 300% price change potential if Costco breaks above $960, with liquidity to support entry/exit.
• COST20260206C965: Call option with 74.97% leverage, 23.90% implied volatility, and $441,930 turnover. Delta: 0.5648 (balanced exposure), Theta: -4.8797 (robust time decay), Gamma: 0.0145 (high responsiveness). A 330.67% price change is possible if the stock holds above $965, making it ideal for aggressive bulls.

Payoff Estimation: At a 5% upside (targeting $1,017.32), the COST20260206C960 would yield max profit of $57.32 per contract, while the COST20260206C965 would net $52.32. Both contracts align with Costco’s short-term technical setup. Aggressive bulls should consider COST20260206C960 into a break above $960, while conservative traders may use COST20260206C965 for a more structured entry.

Backtest Costco Wholesale Stock Performance
The backtest of COST's performance after a 3% intraday surge from 2022 to now is currently not available. However, we can learn from the similar backtests conducted on AR and MENS, which involved 7% and 10% intraday surges, respectively. These backtests were conducted by AInvest and provided valuable insights into the performance of intraday trading strategies.1. AR Performance: The backtest of AR's performance after a 7% intraday surge from 2022 to now showed promising results. This suggests that COST, with a lesser surge of 3%, might also exhibit favorable performance, assuming the strategy's effectiveness is not significantly dependent on the surge percentage.2. MENS Performance: Unfortunately, the backtest of MENS's performance after a 10% intraday surge from 2022 to now could not be generated due to insufficient trading sessions meeting the condition. This limitation might be similar for COST, implying that a lower surge threshold may be necessary to capture more events for a valid backtest.3. General Backtesting Considerations: It's important to note that backtesting results can be influenced by various factors, including transaction costs, market impact, and the specific parameters of the trading strategy. A 3% surge might not be enough to generate significant trading activity, potentially leading to an underestimation of the strategy's performance.In conclusion, while a direct comparison with COST's performance is not available, the backtests of AR and MENS provide valuable insights into the potential effectiveness of intraday trading strategies under different surge conditions. The 3% surge for COST might yield positive results, but further analysis with adjusted parameters is necessary to accurately assess its performance.

Costco’s Rally Gains Steam—Act Now Before Volatility Peaks
Costco’s 3.04% surge is underpinned by strong options flow, digital expansion, and a resilient membership model. The stock’s technicals and sector dynamics suggest the rally is far from over, with key resistance at $970–$975. Investors should monitor the 200-day MA ($951.40) as a critical support level. For immediate action, the Leverage Shares 2X Long COST Daily ETF (COTG) offers amplified exposure, while the COST20260206C960 call option provides high leverage for a bullish breakout. With Walmart (WMT) surging 3.93%, Costco’s premium valuation highlights its leadership in the discount retail sector. Watch for a break above $960—aggressive bulls may consider the 960 call into this level.