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The Trap On Costco With One Day To Go "Call" Options

Let's start by saying it's 3:00 p.m. on Thursday and I am going to talk about the big sell off that Costco experienced this morning on news that seemed to take some time to be disceminated. It turned out to be regular stuff kind of news on the subject matter of last month's food sales. In the early few minutes of trading the average retail trader had no knowledge of what this news was all about. Opening markets started falling quickly. That sometimes happens. Let's move forward to 3:03 p.m.. Costco is way down in price $28.00. That's a big chunk. Might it's Call options rebound tomorrow? I don't usually find these "looking-for-a-rebound" situations to be very profitable.
Might there be a second wave of opening selling pressure on the opening tomorrow?. That's the worry. Now there is more to the story that option traders might want to hear. It has to do with what happened this morning. Costco had a great fall. Look at this morning chart.
It looks like at this point in time the stock might reverse it's downward fall. $17.00 dollars or so is a big drop on any stock on no apparent news. Get in, get in quickly. This looks like an oversold situation. Look at how this near the current striking price options are trading. They are moving upwards. It said $3.90 and now $5.75 and probably rising. It seems like there is an urgency to get in. Yet here is the thing. Costco probably wasn't even on your radar screen all week. Why should you think that you are now smart enough to outguess the system?
Here we now are at 3:38 p.m. and this is now where this same series of Calls are now at. They are down again however look at how they jumped up from $1.37.
Here they are again with five minutes left in the trading session.
Here is how they closed the day.
Would you want to be holding one of these Calls? I am not a big fan of owning "out-of-the-money" one day Calls overnight. Yet the bad news wasn't all that bad. Let's see what happens! Friday morning.
This upward opening move helped all of the traders who got in close to the end of the day. It helped them get a double on their Call option positions. Here also is how the stock ended up trading on the day and a closing look at these options.
So yes there was a way to play yesterday sell off which amounted to waiting unti the end of the day(yesterday to buy in). Today Friday, the storey was reversed. Buying the Puts around ten a.m. this morning as the stock was rebounding was the way to go. Here is one series to look at.
Keep all of this information in mind the next time you see Costco drop like this on a Thursday. It happens more frequently than you might think. (if you want me to comment on any other big name stock send me an email).

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