I have a large appetite, and so do my dogs. And when I have to load up on food to keep us all happy, it’s hard to beat Costco (COST). Considering the money I spend there, and how busy my local store is, it’s surprising that its stock price isn’t doing better. It’s up only about 3.6% on the year, and is lagging the broader market. But COST’s business is solid, and while cautious consumers might not give it as strong growth as it would like, the market might be optimistic about its next earnings in late September and give COST a boost. COST’s OTM calls are trading over equidistant OTM puts, indicating that the market sees risk to the upside. That might be enough for a trader to consider a bullish strategy. COST’s IV has been rising with the approach of earnings, and its 21% overall IV and 33% IV rank are high enough to make short premium trades attractive. If you think COST might rise over the next couple of weeks and don’t want to take risk through earnings, the short put vertical that’s long the 932.5 put and short the 935 put in the September expiration with 22 DTE is a bullish strategy that takes in a credit 1/3 the width of its strikes, has a 77% prob of making 50% of its max potential profit before expiry, and that generates $.55 of positive daily theta.
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