Christmas is coming early for one investor in Costco.
optionMONSTER's Depth Charge monitoring program detected the
purchase of about 2,500 November 100 puts for about $2.20. Similar
amounts were sold in the November 97.50 puts for $1.38 and the
November 95 puts for $0.87. Volume was more than 30 times the open
interest in all three strikes, clearly indicating a new position.
Known as a
bearish Christmas tree
, the strategy is designed to leverage a small pullback in the
big-box retailer. It will generate a credit of $0.05 and earn a
maximum profit of $2.50 if COST closes between $95 and $97.50 on
The traders will be forced to buy shares below that range because
at the 95 strike. He or she probably owns the stock and would be
willing to add to the position in the event of a pullback to that
level. (See our
COST fell 0.43 percent to $101 yesterday but is up 5 percent in the
last month. Shares hit an all-time high above $103 last week but
have been drifting lower since.
Overall option volume was quadruple the daily average in
yesterday's session. Puts accounted for more than 80 percent of the
total, according to the Depth Charge.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.