Costco Stock Today: This Bear Put Spread Could Earn Up To $1,300 By November

shares Costco in bulk (Cost) lost their brilliance this year. On Monday, Costco’s shares decreased by 1 % for this year, while the S&P 500 rose about 15 %. Investors who expect more weak in Costco shares can use Bear options to express this view.

This performance was deepened by Costco shares after the deep discount chain failed to get out of the cup style with the handle in early June, which has led to a continuous decrease since then.

The results of the third quarter reported on September 26 did not do much to alleviate investor concerns. Although the stock profits of $ 5.87 and revenues of 86.16 billion dollars were both imposed previous consensus estimates of $ 5.80 and 86.06 billion dollars, respectively, the market reaction remained silent.

Costco’s basic work continues to grow, with an increase in membership fee – the most important profitable driver – rises by 14 % on an annual basis. This force sheds light on the loyalty of its customer base, even after the company executed the first annual fees since 2017 in the past fall.

However, the discomfort for the investor escalates on the potential impact of definitions and whether the sentence giant can maintain strong growth sufficiently to justify the price ratio to the profits of 51, based on the profits of four four quarters. Any other hints of slowing growth or margin pressure will undoubtedly hurt Costco shares, which are still pricing to perfection.

Building a circular bear on Costco shares

When creating the spread of Bear, the investor buys the option to put it as it also sells a lower strike option. In the case of Costco shares, investors can consider the spread of the bear by purchasing the PUT 900 STRIKE option while selling 880 on the expiration of the validity on November 21.

This trade can currently be placed to deduct about 7 dollars per group of contracts, or $ 700. This also coincides with the maximum $ 700 loss for the investor if the shares are higher than 900 at the expiration.

The maximum profit is the display of strikes minus paid discount. In this case (20-7) x 100 = 1300 dollars per group of options. Investors will realize this maximum profit if Costco shares are less than 880 at the expiration.

Do you want more commercial ideas for the option? Go here

Assessments

Costco currently contains the IBD 46 classification. The stocks were heading to a decrease. In recent weeks, Costco has decreased below the averages of 50 and 200 days.

Costco’s relative classification is very poor. This means that Costco Stock has overcome less than a quarter of all shares in the IBD database over the past 12 months.

Stephen Bell is a writer and commercial based in Vancouver, British Colombia. He is the author of the IBD income investor column, which focuses on a look at low -risk and follow -up shares.

You may also love:

The latest news on Investors.com

How to invest in growth shares: Start your journey here

This is still the golden rule for investment

Look for this sales sign after a massive operation