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Trying To Make Costco Options Impossible To Play That Expire In One Day.

This was a special situation. A quarterly earning report coming out on the eve of one day options. With five days in every trading week the odds of that situation happening are only like twenty percent.  Some companies, more in tune with the potential for market manipulations will avoid earning report releases on Thursday afternoons for this very  reason. For some option players the event of  having one day options reacting to quarterly earning reports is like waiting for Christmas morning. Especially on stocks in the $1,000 dollar range. First the Puts on a Thursday morning at 9:52 a.m.. These are Puts which are $9.75 "out-of-the-money" with one day of trading life to go before they expire. Look at how crazy expensive they are. The stock would have to drop $21.00 in Thursday and Fridays trading just to break even. Earning reports will be coming out at 5:00 p.m. (on a Thursday - today) which is after the market closes. The fireworks will start in the next morning when the market opens  opens up for trading. Well some trading action will happen in the pre-markets.. Could it open up on the trading session $25.00 higher or lower.?  Notice that he open interest in the Call options series shown below is very light?  
What about the Calls? Well these Calls I am now showing you are "in-the-money" by $10.29 cents so really they are only about $10.00 higher than what the stock is trading at.

Now this. The Costco earning report one hour after the markets closed. Here is the news.


 Good news. Or is it? Same store sales are up. People have to eat. Costco is stealing customers away from their competition.  Let's now look at how these options traded on Friday morning. The Puts lose, the Calls win. Yet they were the ones that were crazy expensive to begin with so did these Calls really win? 
Five minutes into the opening trading the stock is up $8.78 and the 1,000 series of Calls which expire today are trading at $20.00. How does this compare with how then closed yesterday? Well they closed at $22.68. So the stock is up but not enough for these Call owners at this particular point in time. The Call holders are still under water. Now look at this. Costco at 10:30 a.m. The stock is now up another $21.00. That happened in one hour. What took took so long to decide that this was a good earnings report? You don't see that time delay very often. The open interest in this series of Calls only went from 275 to 298 during this one hour period of time. That's nothing.

An early morning loss with this Calls has suddenly turned into a profitable experience. Now look at how this gets more crazy. Look at the swing in the "out-of-the-money" Calls which at the start of the day looked like they were lost causes.

Here for example is a look at the 1,030 series of Calls. 

$.65 cents to $18.00. So basically when the stock opened up it was at  $1,017.00 at  9:36. a.m..  It wasn't a super big jump on the opening and it was at about that point in time when these 1030 Call options were so cheap because they were still about $13:00  "out of-the-money". This limp jump in price at this point in time could  have raised the interest in buying Puts. It's other "out-of-the-money" Call options were also cheap . Who would be crazy enough to be purchasing extremely "out-of-the-money" Call options at this point in time? By 11:09 a.m. the 1030 Call options jumped up to $11.36. Then at 3:00 p.m. which was the deadline to get out they were trading at $19.35.
The 1,000 series of Calls we first started looking at  back at 9:51 a.m. which were trading at  $20.00. a.m. are now at  $47.91.


Costco options players are a special breed. Playing "out-of- the-money" Calls thirty minutes into the morning's trading action before the stock really decided to take off was where the real action happened. Very few traders were playing the near to expire call options so don't feel bad for missing out. If all of this material is to confusing to read I ask that you to stick with it. Some blogs are easier to understand than others. Very few writers take the time to write about stuff like this. I don't play Costco one day options. I also am still learning. 

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