Costco Wholesale Corporation (ticker: COST)

2025-01-28

Price Movement

Costco Wholesale Corporation (ticker: COST) is a leading membership-based retail company specializing in warehouse clubs. Founded in 1976 and headquartered in the United States, Costco operates over 800 warehouses globally, offering a wide range of products including general merchandise, electronics, apparel, food, and bulk items at low prices. The company's business model relies on high-volume sales to maintain competitive pricing, attracting both individual members and businesses. Costco also provides additional services such as gas stations, optical centers, and hearing aid clinics in many locations. With a strong focus on customer loyalty and operational efficiency, Costco has established itself as one of the largest retailers worldwide, generating over $145 billion in revenue annually. The company continues to expand its global footprint while maintaining a reputation for quality and affordability.

Historic Price

Analysis of Costco Wholesale Corporation (COST) Based on Provided Data

  1. Current Price and Valuation:
  2. Current stock price: $965.25

  3. Suggests evaluation against historical trends and industry averages is needed.

  4. Earnings Performance:

  5. Trailing EPS: 17.01; Forward EPS: 19.68

  6. Indicates strong profitability, with potential for future growth.

  7. Revenue Overview:

  8. Total revenue: $254.453 billion
  9. Revenue per share: $573.20

  10. Comparison to industry standards is recommended.

  11. Profit Margins:

  12. Gross margin: 12.613%; Operating margin: 3.817%; Net profit margin: 2.9%

  13. Appears relatively low; may indicate operational inefficiencies or typical for retailers.

  14. Debt and Liquidity:

  15. Total debt: $99.489 billion; Debt-to-equity ratio: 42.118
  16. High debt level could pose financial risks.
  17. Cash flow figures: Free cashflow ($4.467B) and operating cashflow ($11.339B)

  18. Strong liquidity, but current and quick ratios below 1 may indicate short-term management needs.

  19. Analyst Recommendations:

  20. RecommendationKey: "buy"; Average recommendation: 1.97 from 32 analysts

  21. Positive sentiment, though individual analyst insights should be reviewed.

  22. Growth Metrics:

  23. Revenue growth: 0.01%; Gross profit growth: 8.4%

  24. Minimal revenue growth; possible competitive or market challenges.

  25. Short Interest and Market Sentiment:

  26. Shares short: 6.589M; Short ratio: 3.48

  27. Indicates bearish sentiment; historical comparison needed.

  28. Key Ratios and Valuation:

  29. Price-to-book (P/B): 18.107; PEG ratio: 5.646

  30. PEG suggests undervaluation relative to growth, though industry peers' ratios should be compared.

  31. Competitive Position:

    • Competitors include Walmart and Amazon; Amazon's higher revenue growth could influence analyst optimism.

  32. Dividend Considerations:

    • No explicit dividend yield mentioned; importance of dividend history for investment decision.

  33. Conclusion:

    • Costco is financially stable with strong cash flow but faces challenges like high debt and low margins.
    • Positive analyst sentiment may reflect growth prospects despite these issues.
    • Further analysis with detailed financial statements and industry context is recommended.

Investment Consideration: - Potential investors should weigh Costco's strengths (solid earnings, liquidity) against risks (high debt, slow revenue growth). - Market conditions and economic factors will influence investment timing and valuation.

Historic Price and Seasonality

The company has total assets of $73.4 billion and total liabilities of $48.9 billion, resulting in a working capital of -$0.76 billion. The company reported an EBIT of $9.96 billion and net income from continuing operations of $7.37 billion. The market cap is $426.9 billion.

The cash flow statement shows operating activities generated $11.3 billion in cash, while investing activities used $4.4 billion. The company has a strong revenue base of $258.8 billion and retained earnings of $18.7 billion.

Key financial metrics include: - Altman Z-Score: 9.55 (low risk of bankruptcy) - Piotroski Score: 7 (strong financial health)

Analyst expectations data is not available in the provided information.

Costco Wholesale Corporation (COST) demonstrates strong financial performance, as evidenced by its Return on Capital (ROC) of 28.83%, which highlights the company's ability to efficiently use its capital to generate profits. This high ROC indicates that Costco is effectively deploying its resources to drive returns for shareholders. Additionally, the earnings yield of approximately 1.72% suggests that the stock is undervalued relative to its earnings, making it an attractive investment opportunity. A higher earnings yield typically signals a greater return on invested capital compared to the cost of equity, further reinforcing Costco's position as a company worth considering for long-term growth and value creation.

Analysis of Costco Wholesale Corporation (COST) Metrics Based on Benjamin Graham's Criteria

Benjamin Graham's investment philosophy emphasizes fundamental analysis and the importance of key financial metrics in selecting stocks that offer long-term value. Below is an analysis of Costco's financial metrics, comparing them to Graham's criteria:

1. Price-to-Earnings (P/E) Ratio

2. Price-to-Book (P/B) Ratio

3. Debt-to-Equity Ratio

4. Current Ratio

5. Quick Ratio

Conclusion:

Costco demonstrates strong financial stability and low debt leverage, aligning well with Graham's criteria. However, its high P/E and P/B ratios indicate that the stock may be overvalued relative to its earnings and book value. Investors following Graham's principles might find Costco less attractive due to these valuations, unless they believe the company can continue to grow and justify such high multiples.

This analysis underscores the importance of considering multiple metrics together when evaluating an investment opportunity, as highlighted in "The Intelligent Investor."

The provided financial data offers a comprehensive view of a company's revenue and tax structure. Here's a structured summary:

Revenue

Income Tax Expense Reconciliation

Deferred Tax Assets

Deferred Tax Liabilities

Net Deferred Tax Position

Unrecognized Tax Benefits

Share-Based Payment Arrangements

Key Considerations

This analysis highlights the company's sophisticated tax strategies and provides insights into its financial health and prospects.

The data provided represents historical dividend information for a company. Each entry includes details such as the declaration date, record date, payment date, and dividend amounts adjusted for corporate actions. Here's an organized summary of the key insights:

  1. Data Structure: The data is structured as a list of dictionaries, each containing the following fields:
  2. date: Likely the declaration date.
  3. label: A descriptive label for the dividend.
  4. adjDividend and dividend: Dividend amounts, with adjDividend adjusted for corporate actions like stock splits.

  5. recordDate and paymentDate: Dates related to the dividend process.

  6. Date Analysis: All dates are in YYYY-MM-DD format, consistent across entries. The time between declaration and payment is variable but typically a few weeks, indicating a standard processing period.

  7. Trend Analysis: Dividend amounts show variability, with increases over certain periods (e.g., 2016-2017), suggesting potential dividend growth strategies by the company.

  8. Potential Uses:

  9. Financial Planning: Understanding dividend trends can aid in forecasting future dividends.
  10. Investment Analysis: Evaluating dividend growth and consistency for investment decisions.

  11. Historical Research: Studying corporate policies on dividend distribution over time.

  12. Considerations:

  13. Ensure data completeness and accuracy before analysis.
  14. Use tools like pandas for structured analysis and visualization of trends.
  15. Consider the impact of stock splits or buybacks on adjDividend.

This historical dividend data is a valuable resource for assessing company performance, dividend policies, and making informed investment decisions.

Statistic Name Value
R-Squared 0.85
Beta 1.24
Alpha (Intercept) 3.89%
P-Value for Beta <0.05
P-Value for Alpha 0.12

The relationship between COST and SPY exhibits a strong connection, as evidenced by the high R-squared value of 0.85. This indicates that approximately 85% of COST's price movements can be explained by the market performance captured by SPY. The beta coefficient of 1.24 suggests that COST is slightly more volatile than the broader market, as it tends to amplify market movements by 24%. The p-value associated with beta being less than 0.05 confirms the statistical significance of this relationship.

The alpha intercept of 3.89% represents the excess return that COST is expected to achieve independent of market performance, assuming the model holds true. However, the p-value for alpha (0.12) suggests that this excess return may not be statistically significant at conventional levels. This implies that while COST may appear to offer a slight premium relative to SPY, further analysis would be needed to confirm the reliability of this alpha.

Costco Wholesale Earnings Call Summary: Key Highlights

  1. Financial Performance (Q4 & Fiscal Year 2023):

  2. Revenue Growth: Costco reported growth in both U.S. and international regions, though international performance saw a slight deceleration compared to prior quarters. This was attributed to nuances like regional economic factors and holiday impacts rather than specific issues.

  3. Digital Business Performance:

  4. E-commerce Growth: The company is pleased with its digital growth but recognizes the need for further improvements in areas such as search functionality and mobile app enhancements.

  5. Membership Trends: A significant portion of new members join online, with higher renewal rates. However, these members often don't fully understand executive membership benefits initially, prompting plans to educate them on value.

  6. Logistics Improvements:

  7. Operational Enhancements: Costco has made strides in logistics, including faster delivery times and more efficient distribution centers, aiming to enhance customer satisfaction and operational efficiency.

  8. Future Plans & Investments:

  9. Focus Areas: The company is investing in digital infrastructure and expanding its logistics network. They aim to improve both back-end operations and front-end member experiences with upcoming initiatives.

  10. Employee Relations:

  11. Unionization & Communication: Costco emphasized their commitment to fair wages and benefits, addressing recent unionization votes by maintaining open communication with employees to foster a positive work environment.

  12. Outlook for Next Fiscal Year:

  13. Optimism Despite Challenges: The company remains optimistic about future growth despite potential challenges like economic uncertainties and supply chain issues, confident in their strategic approaches to sustain progress.

This summary captures the essential points discussed during the earnings call, providing a clear overview of Costco's current performance and future strategies. Earnings per Share

The text appears to be part of a quarterly report (Form 10-Q) filed by Costco Wholesale Corporation for the first quarter of fiscal year 2025. Here's a summary of the key points:

Key Highlights:

  1. Dividends:
  2. Costco declared a dividend of $0.58 per share on November 24, 2024.

  3. The dividend is payable on December 23, 2024, to shareholders of record as of December 9, 2024.

  4. Share Repurchases:

  5. Costco repurchased a total of 230 million shares during the first quarter at an average price of $899.23 per share.
  6. The total value of these repurchases was approximately $206.79 billion.

  7. These repurchases are part of Costco's ongoing $4 billion share repurchase program, which was approved by its Board of Directors in January 2023 and is set to expire in January 2027.

  8. Exhibits:

  9. The filing includes exhibits such as the company's articles of incorporation, bylaws, executive bonus plan, employment agreements, certifications, and XBRL-related documents.

  10. Certain information in some exhibits has been omitted for confidentiality reasons.

  11. Signatures:

  12. The report was signed on behalf of Costco Wholesale Corporation by Ron M. Vachris (Chief Executive Officer, President, and Director) and Gary Millerchip (Executive Vice President and Chief Financial Officer) on December 18, 2024.

Summary:

The document confirms that Costco continues to execute its share repurchase program aggressively during the first quarter of fiscal year 2025. The company also maintained its dividend policy and provided updates on its governance and legal filings.

The provided text appears to be a summary of financial news and updates, focusing on various companies and market indices. Here's a concise breakdown:

Key Companies Mentioned:

  1. Walmart Inc. (WMT):
  2. A global retail giant with significant influence in the retail sector.

  3. Financial performance and strategies are likely analyzed in detail.

  4. The Home Depot (HD):

  5. A leading home improvement retailer.

  6. Insights into its financial health and market positioning would be included.

  7. Costco Wholesale Corporation (COST):

  8. Known for its wholesale business model and membership program.
  9. Financial metrics and performance indicators are likely discussed.

Market Context:

Stock Performance Highlights:

Additional Features:

This text serves as a snapshot combining company-specific analyses with broader market trends, aiding investors in informed decision-making. Let me know if you need further details or analysis!

Summary of Costco's Volatility (2020-2025)

  1. Costco's stock exhibited moderate volatility during the period, influenced by both market-wide shocks and company-specific factors.
  2. The ARCH model highlights significant baseline volatility (omega) and a noticeable impact of past squared returns on current volatility (alpha[1]).
  3. The results suggest that while past market movements contribute to future volatility, there is also a persistent level of inherent risk.

Key Features of Volatility

HTML Table of Statistics

Statistic Name Statistic Value
Omega Coefficient 1.6601
Alpha[1] Coefficient 0.3244
R-squared Value 0.000
AIC Value 4515.09

To analyze the financial risk of a $10,000 investment in Costco Wholesale Corporation (COST) over a one-year period, we employ a combination of volatility modeling and machine learning predictions. This integrated approach provides insights into both the historical volatility patterns of the stock and its potential future returns.

Volatility Modeling

Volatility modeling is used to assess the historical fluctuations in Costco's stock prices, which helps us understand the degree of uncertainty or risk associated with the investment. By analyzing past price movements, we can identify periods of heightened volatility and determine how these might impact future returns. This step is crucial for quantifying the variability in stock prices, which directly influences the potential risks and rewards of holding COST.

Machine Learning Predictions

Machine learning predictions are utilized to forecast future returns based on a variety of factors, including historical price data, market trends, and other relevant variables. These predictions provide a forward-looking perspective, allowing us to estimate the expected return and associated risk of the investment. By combining this with volatility modeling, we can create a more comprehensive view of the potential risks and returns.

Results

The analysis reveals that the annual Value at Risk (VaR) for a $10,000 investment in Costco Wholesale Corporation, based on a 95% confidence interval, is $186.18. This means there is a 5% chance that losses could exceed this amount over the one-year period. While this figure highlights the potential downside risk, it also suggests that the investment carries a manageable level of risk relative to its size.

The integration of volatility modeling and machine learning predictions provides a robust framework for understanding and managing the risks associated with equity investments like Costco Wholesale Corporation. By leveraging both historical data and forward-looking forecasts, investors can make more informed decisions about their portfolio allocations.

Long Call Option Strategy

To provide a comprehensive analysis of the most profitable long call options for Costco Wholesale Corporation (COST), I will consider the Greeks provided in your table. Since you haven't shared the specific numbers, I'll outline a general approach based on typical option pricing and Greek values. This will allow me to discuss potential profit and loss scenarios while adhering to the constraints of not referencing specific rows in the table.

Key Considerations for Profitability

  1. Delta (): A higher Delta indicates greater sensitivity to price movements. For long calls, Delta typically ranges from 0 (for deep OTM options) to 1 (for ITM options). A Delta of 0.7 or higher suggests a high probability of profit if the stock moves 2% higher.

  2. Gamma (): Gamma measures the rate of change of Delta. Higher Gamma means Delta increases more rapidly as the stock price rises, which can amplify profits but also increase risk.

  3. Theta (): Theta represents time decay. Lower Theta values are preferable for long-term options, as they lose less value over time.

  4. Vega (): Vega measures sensitivity to volatility. Higher Vega indicates greater potential profit if implied volatility increases.

  5. Rho (): Rho measures sensitivity to interest rate changes. For most equity options, Rho is relatively small and can be ignored unless rates change significantly.

Five Profitable Options

Based on these considerations, I will outline five hypothetical long call options for COST that could be among the most profitable, considering their expiration dates and strike prices.

1. Near-Term Option: March $250 Call

Analysis: This near-term call option has a high Delta, indicating significant potential profit if the stock price increases by 2%. The relatively low Theta suggests that time decay will erode value quickly, so this option is best suited for short-term traders expecting a rapid price movement. The Gamma of ~0.15 means that Delta will increase as the stock price rises, amplifying profits further.

Risk and Reward: - Potential Profit: If COST increases by 2% (from $245 to $250), the option will be ITM, and the profit will depend on the intrinsic value minus the premium paid. With a Delta of ~0.7, this call is likely to increase in value by approximately $1.40 ($245 * 0.7). The actual profit would be the difference between the strike price and the stock price, minus fees. - Potential Loss: Limited to the premium paid.

2. Intermediate-Term Option: May $260 Call

Analysis: This intermediate-term call option offers a moderate Delta, indicating a balance between risk and reward. The lower Theta compared to the near-term option makes it suitable for traders expecting a price increase within a few months. The higher Vega suggests that increased volatility could lead to greater profits.

Risk and Reward: - Potential Profit: With a Delta of ~0.5, this call is expected to gain ~$1.20 ($245 * 0.5) if the stock increases by $4.90 (2% increase). The profit will also depend on Vega if volatility rises. - Potential Loss: Limited to the premium paid.

3. Long-Term Option: January $270 Call

Analysis: This long-term call option has a lower Delta but higher Vega and minimal Theta decay. It is ideal for investors with a longer time horizon who believe that COST will eventually rise by 2%. The higher Vega suggests significant potential profit if volatility increases.

Risk and Reward: - Potential Profit: With a Delta of ~0.4, this call is expected to gain ~$0.98 ($245 * 0.4) if the stock increases by $4.90. The long expiration allows for time decay to be less impactful. - Potential Loss: Limited to the premium paid.

4. Deep ITM Option: March $230 Call

Analysis: This deep ITM call option has an extremely high Delta, meaning it is highly sensitive to price movements. The high Gamma suggests that Delta will increase further as the stock price rises. However, the high Theta indicates rapid time decay.

Risk and Reward: - Potential Profit: With a Delta of ~0.9, this call is expected to gain ~$2.20 ($245 * 0.9) if the stock increases by $4.90. The premium paid will be relatively high due to its ITM status. - Potential Loss: Limited to the premium paid.

5. Out-of-the-Money Option: May $265 Call

Analysis: This OTM call option has a lower Delta but higher potential for gamma scalping (profit from increasing Delta as the stock price rises). The moderate Vega suggests that increased volatility will have a significant impact on its value.

Risk and Reward: - Potential Profit: With a Delta of ~0.3, this call is expected to gain ~$0.74 ($245 * 0.3) if the stock increases by $4.90. The premium paid will be relatively low due to its OTM status. - Potential Loss: Limited to the premium paid.

Conclusion

These five options represent a range of strategies for different market outlooks and time horizons. Near-term options like the March $250 call are ideal for short-term traders expecting rapid price movements, while long-term options like the January $270 call are suitable for investors with a longer horizon. The choice between ITM and OTM options depends on risk tolerance and expected volatility.

Let me know if you'd like further clarification or additional strategies!

Short Call Option Strategy

To analyze the most profitable short call options for Costco Wholesale Corporation (COST) with a focus on minimizing the risk of share assignment, we consider options across various expiration dates and strike prices. The target stock price is set at 2% below the current price, and we prioritize options where the strike price remains above this target to reduce assignment risk.

Analysis of Options by Expiration Date

  1. Near-Term (1-Month Expiration)
  2. Strike Price: Consider a strike significantly higher than the target price.
  3. Greeks Insight: High theta decay ensures rapid premium erosion, but focus on strikes well above the target to minimize assignment risk.

  4. Profitability: Lower premiums due to short time frame, but favorable for quick returns.

  5. Short-Term (3-Month Expiration)

  6. Strike Price: Choose a strike with moderate delta and above the target.
  7. Greeks Insight: Moderate theta decay allows more time, balancing premium and risk.

  8. Profitability: Slightly higher premiums than near-term options.

  9. Medium-Term (6-Month Expiration)

  10. Strike Price: Select an out-of-the-money option with low delta.
  11. Greeks Insight: Lower theta decay but higher premiums, balancing time and risk.

  12. Profitability: Offers a good balance between premium and assignment risk.

  13. Long-Term (1-Year Expiration)

  14. Strike Price: Opt for deep out-of-the-money options.
  15. Greeks Insight: Minimal delta reduces assignment risk; high premium potential.

  16. Profitability: Highest premiums but longest time to expiration, balancing with minimal assignment risk.

  17. High Premium/Low Delta Option

  18. Strike Price: Focus on strikes far above the target with very low delta.
  19. Greeks Insight: Ensures minimal assignment risk and high premium returns.
  20. Profitability: Ideal for maximizing profit while minimizing share assignment risk.

Risk-Reward Trade-Off

Conclusion

The most profitable options are those with favorable Greekslow delta for minimal assignment risk, high theta for time decay benefit, and moderate vega. Balancing these factors across different expirations provides a diversified approach to maximize profit while minimizing risks associated with share assignment.

Long Put Option Strategy

I'm sorry, but you haven't provided the actual data for the Greeks table or any specific options chain for Costco Wholesale Corporation (COST). To provide a detailed analysis of the most profitable long put options, I would need access to the specific strike prices, expiration dates, and Greek values (delta, gamma, vega, theta, and rho) for each option in the chain.

However, I can guide you on how to approach this analysis based on general principles of options trading and the Greeks:

Key Considerations for Long Put Options

  1. Delta: For a long put, delta measures how much the option's price changes when the underlying stock decreases. A more negative delta (closer to -1) indicates higher sensitivity to downward movements in the stock price.
  2. Gamma: Gamma measures the rate of change of delta as the stock price moves. Higher gamma means greater convexity in the options payoff, which can lead to larger profits if the stock moves significantly against the trade.
  3. Vega: Vega measures sensitivity to implied volatility. A higher vega indicates that the options price is more sensitive to changes in market volatility. This can be advantageous if you expect increased volatility.
  4. Theta: Theta measures time decay, or how much the option loses value as the expiration date approaches. For long puts, theta is negative because time decay works against you; the closer the expiration, the faster the time decay.
  5. Rho: Rho measures sensitivity to changes in interest rates. This is generally less significant for shorter-dated options.

Identifying the Most Profitable Options

To identify the most profitable long put options, focus on: - Strike prices that are out-of-the-money (OTM) by a reasonable margin (e.g., 2% below the current stock price). - Expiration dates ranging from near-term to long-term to diversify time frames. - High gamma and delta values to maximize potential profits. - Moderate to high vega to benefit from increases in implied volatility.

Five Hypothetical Options Based on Expiration Date and Strike Price

Below are five hypothetical options based on different expiration dates and strike prices. These examples assume you have access to the Greeks for each option:

1. Near-Term Option (Short-Dated)

Analysis: This is a near-term option with moderate delta and gamma, suggesting it has decent potential for profit if the stock price drops significantly in the short term. The negative theta indicates that time decay will reduce its value as expiration approaches. This could be a good candidate if you expect a sharp drop in the stock price within the next month.

2. Mid-Term Option

Analysis: This mid-term option has a higher delta and gamma than the near-term option, indicating greater sensitivity to price movements and potentially higher profits if the stock moves downward. The lower theta decay compared to the near-term option makes it more attractive for medium-term trading.

3. Long-Term Option

Analysis: This long-term option has a high delta, meaning it is highly sensitive to downward stock movements. The higher vega suggests that increased volatility could significantly boost its value. However, the lower gamma indicates less convexity in the payoff structure compared to shorter-dated options. This makes it a good choice for investors with a longer time horizon and expectations of significant price declines.

4. Deep OTM Near-Term Option

Analysis: This deep OTM option has a lower delta, meaning it is less sensitive to downward stock movements. However, the low theta decay makes it relatively inexpensive in terms of time value. This could be a speculative trade for investors expecting a sharp decline in the stock price within the near term.

5. Moderately ITM Option

Analysis: This moderately ITM option has a high delta, making it highly sensitive to downward movements in the stock price. The higher gamma suggests greater potential for profit if the stock moves significantly lower. However, its sensitivity to implied volatility is moderate compared to other options on this list.

Risk Considerations

Conclusion

The most profitable long put options depend on your risk tolerance, time horizon, and expectations about market movements. Generally, shorter-dated options with higher delta and gamma are better for short-term trading, while longer-dated options may offer more potential for significant price declines over time. Always consider the Greeks when evaluating options to make informed decisions about their profitability and risks.

Short Put Option Strategy

Certainly! Below is an example of how you might structure your analysis for the most profitable short put options in COST. The Greeks (delta, gamma, theta, vega) are critical to understanding the profitability and risk of each option. Since I don't have access to specific data or a table, this response will be hypothetical and based on general principles.

Analysis of Short Put Options for Costco Wholesale Corporation (COST)

When analyzing short put options, profitability is influenced by several factors: the strike price relative to the stock price, the expiration date, implied volatility (IV), and the Greeks. For short puts, you want to maximize profit while minimizing the risk of assignment (i.e., having shares assigned if the option goes in the money). Given that the target stock price is 2% under the current stock price, we will focus on options with strike prices near this level.

Key Considerations:

  1. Delta: For short puts, delta measures how much the option's premium changes as the underlying stock price decreases. A short put with a lower delta (more out-of-the-money) is less likely to be assigned.
  2. Gamma: Gamma measures the rate of change in delta. Higher gamma options are more sensitive to price movements and carry higher risks.
  3. Theta: Theta represents time decay, which works in favor of the short seller as time passes if the option remains out-of-the-money.
  4. Vega: Vega measures sensitivity to implied volatility. High IV can increase premiums but also increases risk.

Five Profitable Options (Near-Term Through Long-Term)

Below are five hypothetical options based on expiration dates and strike prices. These options are selected for their potential profitability, considering the target stock price of 2% below the current level.

1. February 2024 Expiration

Analysis: This short put is near-term and has a strike price significantly out-of-the-money (OTM). The low delta (-0.25) indicates that the option is less likely to be assigned, while the negative theta (-$0.50/day) means time decay will work in your favor. The premium received for this option could be significant due to high implied volatility (1.5 vega), but the risk is manageable as long as the stock remains above $375.

Profit/Loss Scenarios: - Best Case: If COST stays above $375, you keep the full premium. - Worst Case: If COST drops below $375, shares may be assigned, and you would incur a loss based on the difference between the strike price ($375) and the target price ($470.40), plus the premium received.

2. April 2024 Expiration

Analysis: This mid-term option has a slightly higher delta (-0.30) than the February 2024 expiration, meaning it is more sensitive to price movements but still OTM. The theta decay is lower ($-0.30/day), so time decay impacts are less severe compared to the near-term option.

Profit/Loss Scenarios: - Best Case: If COST remains above $380, you keep the premium. - Worst Case: If COST drops below $380, shares may be assigned. The gamma (0.15) indicates that delta will increase rapidly if the stock price decreases.

3. July 2024 Expiration

Analysis: This longer-term option offers more time for the stock to remain above $390, which is still below the target price of $470.40. The higher gamma (0.20) means this option is more sensitive to price changes, but the delta (-0.40) is manageable. Theta decay is minimal ($-0.20/day), making this a relatively stable trade.

Profit/Loss Scenarios: - Best Case: If COST remains above $390, you keep the premium. - Worst Case: If COST drops below $390, shares may be assigned. The gamma (0.20) suggests that delta will increase significantly if the stock price decreases.

4. January 2025 Expiration

Analysis: This long-term option is slightly in-the-money (ITM) based on the current stock price ($480). The higher delta (-0.50) indicates a greater likelihood of assignment if the stock continues to decline, but the gamma (0.30) suggests that this risk can be managed by monitoring price movements.

Profit/Loss Scenarios: - Best Case: If COST remains above $400, you keep the premium. - Worst Case: If COST drops below $400, shares may be assigned. The higher gamma (0.30) and vega (2.5) indicate increased sensitivity to price changes.

5. August 2025 Expiration

Analysis: This is the most speculative option, with a strike price closer to the current stock price ($480). The higher delta (-0.60) and gamma (0.40) indicate increased sensitivity to price movements, but the theta decay ($-0.10/day) is minimal.

Profit/Loss Scenarios: - Best Case: If COST remains above $410, you keep the premium. - Worst Case: If COST drops below $410, shares may be assigned. The high gamma (0.40) and vega (3.0) suggest that this option carries significant risk.

Conclusion

The February 2024 expiration is recommended for its low delta, gamma, and theta decay, making it the most profitable and least risky option in this list. As you move to longer expirations, the potential profit increases, but so does the risk of assignment. Always monitor implied volatility and price movements when trading options.

Vertical Bear Put Spread Option Strategy

Certainly! While I don't have access to specific options chain or greeks data for Costco (COST), I can outline a general approach to identifying and analyzing potential vertical bear put spread strategies based on theoretical considerations and best practices.

Vertical Bear Put Spread Strategy Overview:

A vertical bear put spread involves selling a higher strike put and buying a lower strike put with the same expiration date. This strategy profits when the underlying stock price decreases moderately, but not too sharply (since shares could be assigned). The goal is to identify options where the potential profit outweighs the risk of assignment.

Key Considerations:

  1. Minimizing Assignment Risk: Focus on options where the probability of the lower strike put being in the money (ITM) is low. This reduces the chance of having shares assigned.
  2. Profit Potential: The maximum profit is the difference between the strikes minus the net premium received.
  3. Risk Management: The loss is limited to the amount paid for the spread if shares are assigned.

Analysis and Recommendations:

Below, I provide five hypothetical examples based on different expiration dates and strike prices. These are illustrative only, as no specific data is provided.

1. Near-Term Vertical Bear Put Spread (30-Day Expiration)

2. Intermediate-Term Vertical Bear Put Spread (60-Day Expiration)

3. Long-Term Vertical Bear Put Spread (1-Year Expiration)

4. Narrow Strike Spread (30-Day Expiration)

5. Wider Strike Spread (60-Day Expiration)

Conclusion:

The most profitable vertical bear put spread strategy depends on your risk tolerance and market outlook. For minimal assignment risk, focus on shorter expirations (e.g., 30-day) with narrow strike spreads ($305 vs. $295). For higher potential profits, consider longer expirations (e.g., 1-year) but be prepared for greater assignment risk.

In a real-world scenario, you would analyze the specific greeks values and implied volatility from the options chain to make informed decisions.

Vertical Bull Put Spread Option Strategy

To create a vertical bull put spread strategy for Costco Wholesale Corporation (COST), we focus on pairs of puts where buying a higher strike put and selling a lower strike put on the same expiration date. This strategy profits when the underlying stock increases or remains stable. Here's how to approach it:

Strategy Overview:

Key Considerations:

  1. Expiration Dates: Choose from near-term (e.g., March) to longer-term expirations. Near-term options have lower premiums but higher volatility; longer-term options offer more time but higher costs.
  2. Strike Prices: Select strike prices around a 2% target from the current stock price (e.g., $306 for a 2% increase if COST is at $300).
  3. Greeks Analysis:
  4. Delta: Ensure the spread's delta is positive, indicating profit with an upward stock movement.
  5. Gamma: Lower gamma reduces sensitivity to price changes, minimizing risk.
  6. Vega: Higher vega indicates sensitivity to volatility; look for high premiums allowing for potential premium decay.

Risk and Reward:

Five Choices Based on Expiration:

  1. Near-Term (March) Options:
  2. Buy March $305 Put

  3. Sell March $295 Put

  4. Short-Term (April) Options:

  5. Buy April $307 Put

  6. Sell April $297 Put

  7. Mid-Term (June) Options:

  8. Buy June $310 Put

  9. Sell June $298 Put

  10. Long-Term (September) Options:

  11. Buy September $315 Put

  12. Sell September $300 Put

  13. Very Long-Term (December) Options:

  14. Buy December $320 Put
  15. Sell December $305 Put

Conclusion:

Each option pair offers varying risk and reward profiles based on expiration and strike prices. By analyzing the Greeks and considering market conditions, one can select the optimal spread to align with their risk tolerance and market outlook. This structured approach ensures a strategic balance between potential profit and managed risk.

Vertical Bear Call Spread Option Strategy

Creating a vertical bear call spread strategy for Costco Wholesale Corporation (COST) involves selecting two call options: one that you sell (higher strike price) and another that you buy (lower strike price), both expiring on the same date. The goal is to profit when the stock price decreases or remains stable. Below, I analyze five potential vertical bear call spread strategies across different expiration dates and strike prices.

1. Near-Term Vertical Bear Call Spread

2. Short-Term Vertical Bear Call Spread

3. Intermediate-Term Vertical Bear Call Spread

4. Long-Term Vertical Bear Call Spread

5. Very Long-Term Vertical Bear Call Spread

Conclusion

Each of these vertical bear call spread strategies offers a unique balance of risk and reward depending on the chosen expiration dates and strike prices. The near-term spreads (e.g., January 20th) provide quick profit opportunities but come with higher gamma and theta risks. Longer-dated options, such as those expiring in December, offer more time for the strategy to play out but require careful consideration of premium erosion.

To minimize the risk of shares being assigned, focus on strikes where the probability of assignment is low (e.g., deep out-of-the-money). By selecting the appropriate expiration dates and strike prices, you can tailor your vertical bear call spread to align with your risk tolerance and market outlook for Costco Wholesale Corporation.

Vertical Bull Call Spread Option Strategy

To analyze the most profitable vertical bull call spread strategy for Costco Wholesale Corporation (COST), we need to focus on the relationship between strike prices and expiration dates while considering the Greeksdelta, vega, and theta. A vertical bull call spread involves buying a higher strike price call option and selling a lower strike price call option with the same expiration date. The goal is to profit from an upward movement in the stock price within a specified range.

Key Considerations:

  1. Risk of Assignment: Since we are shorting a lower strike call, there is a risk that if the stock price reaches or exceeds this strike price, the short option may be exercised, resulting in shares being assigned to us. To minimize this risk, we should focus on options where the probability of assignment is low, typically near-the-money options with sufficient time decay.

  2. Profit and Loss Scenarios:

  3. Maximum Profit: The potential profit is limited to the difference between the strike prices minus the net premium paid.

  4. Maximum Loss: The maximum loss is limited to the net premium paid for the spread.

  5. Greeks Analysis:

  6. Delta: Reflects sensitivity to stock price changes. A higher delta indicates greater sensitivity, which is desirable in a bullish strategy.
  7. Vega: Measures sensitivity to implied volatility. Lower vega options are preferred to minimize volatility risk.
  8. Theta: Represents time decay. Higher theta indicates faster premium erosion, which can reduce the cost of carrying the position but also limits holding time.

Five Options Strategies:

Here are five potential vertical bull call spread strategies based on expiration dates and strike prices, considering the target stock price is 2% over or under the current price:

1. Near-Term (30 Days) Vertical Bull Call Spread

2. Intermediate-Term (90 Days) Vertical Bull Call Spread

3. Long-Term (180 Days) Vertical Bull Call Spread

4. Vertical Bull Call Spread with In-the-Money Strikes

5. Vertical Bull Call Spread with Out-of-the-Money Strikes

Conclusion:

Each of these strategies offers different risk-reward profiles depending on the expiration date and strike prices chosen. The near-term strategy provides quick profitability but with faster time decay, while the long-term strategy offers more potential upside but requires a larger premium outlay. Traders should consider their individual risk tolerance, time horizon, and market outlook when selecting the appropriate vertical bull call spread strategy.

Spread Option Strategy

To create a calendar spread strategy for Costco (COST) involving buying a call option and selling a put option, we can follow this structured approach:

Strategy Overview:

  1. Objective: Profit from stock price movements of approximately 2% in either direction while managing assignment risk.
  2. Options Selection:
  3. Buy an Out-of-the-Money (OTM) Call: Choose a strike price 2% above the current stock price to capitalize on upward movements.
  4. Sell an OTM Put: Select a strike price 2% below the current stock price to generate income and minimize assignment risk.

Example Scenarios:

Expiration Considerations:

Risk and Reward Analysis:

Five Option Pairs (Near-Term to Long-Term):

  1. Pair 1:
  2. Buy Call Strike $306 expiring in 1 month.

  3. Sell Put Strike $294 expiring in 1 week.

  4. Pair 2:

  5. Buy Call Strike $306 expiring in 3 months.

  6. Sell Put Strike $294 expiring in 2 weeks.

  7. Pair 3:

  8. Buy Call Strike $306 expiring in 6 months.

  9. Sell Put Strike $294 expiring in 1 month.

  10. Pair 4:

  11. Buy Call Strike $306 expiring in 1 year.

  12. Sell Put Strike $294 expiring in 3 months.

  13. Pair 5:

  14. Buy Call Strike $306 expiring in 18 months (long-dated).
  15. Sell Put Strike $294 expiring in 6 months.

Conclusion:

This strategy balances potential profits from stock price movements with careful management of assignment risk by selecting OTM strikes and varying expiration dates. Each pair offers a different risk-reward profile, allowing for tailored investment decisions based on market expectations and risk tolerance.

Calendar Spread Option Strategy #1

To set up an options strategy with strikes at 2% over and under the current stock price, follow these steps:

  1. Determine Current Stock Price (S):
    Identify the current market price of the underlying asset.

  2. Calculate Strike Prices:

  3. Put Strike: Set at 98% of S (i.e., S 0.98). This is 2% below the current price.

  4. Call Strike: Set at 102% of S (i.e., S 1.02). This is 2% above the current price.

  5. Buy a Put Option:

  6. Purchase a put option with the strike price calculated as 98% of S. This gives you the right to sell shares at the lower strike price if the stock drops below that level, allowing you to profit from a downward move.

  7. Sell a Call Option:

  8. Sell a call option with the strike price set at 102% of S. By selling this call, you receive premium income and limit potential losses if the stock rises beyond this strike. Since the call is initially out-of-the-money (OTM), the chance of being exercised is lower unless volatility increases significantly.

  9. Consider Expiration Dates:

  10. Choose expiration dates that align with your market outlook. If expecting a short-term move, select nearer expirations; for longer-term strategies, consider further-dated options.

  11. Evaluate Risk and Reward:

  12. Profit Potential: The maximum profit is theoretically unlimited on the put side if the stock price crashes below 98% of S. However, this is tempered by the sold call, which caps upside gains above 102% of S.

  13. Risk: Losses are limited to the net premium paid (the cost of buying the put minus the premium received from selling the call). The worst-case scenario is losing this net investment.

  14. Monitor and Adjust:

  15. Keep an eye on market movements and volatility. If conditions change, you may choose to close positions or adjust strikes as needed.

This strategy combines a protective put with a covered call, aiming to capitalize on a downward trend while limiting losses if the market moves upward within the 2% range. It's a balanced approach that seeks to profit from downside risks while cautiously participating in potential upside movements.

Calendar Spread Option Strategy #2

To analyze the most profitable calendar spread options strategy for Costco Wholesale Corporation (COST), we will evaluate a calendar spread where you sell a put option at one expiration date and simultaneously buy a call option with a different expiration date. The goal is to identify the optimal strike prices and expiration dates that align with the target stock price of 2% over or under the current stock price, while minimizing the risk of shares being assigned (i.e., reducing the likelihood of options being in-the-money).

Understanding Calendar Spread Risks and Rewards

A calendar spread involves selling one option and buying another with different expirations but the same strike price. In this case, you are selling a put option at one expiration date and buying a call option at a different expiration date. The key risks include:

  1. Assignment Risk: If the stock price moves significantly (by 2% or more), there is a higher probability that the options could be in-the-money, leading to potential share assignment.
  2. Volatility Risk: High volatility can increase the likelihood of options being assigned.
  3. Time Decay Risk: The value of options decreases as expiration approaches due to theta decay.

Strategy Overview

To minimize the risk of shares being assigned, we will focus on strike prices that are near the current stock price and expirations that allow for minimal movement (i.e., within a 2% range). By selecting strikes close to the current price and pairing them with different expiration dates, we can maximize potential profits while reducing the likelihood of assignment.

Five Profitable Calendar Spread Options Strategies

Below, I will outline five calendar spread strategies based on expiration dates and strike prices. These strategies are designed to target a 2% movement in the stock price (either up or down) and minimize the risk of shares being assigned.

1. Near-Term vs. Near-Term Calendar Spread

2. Near-Term vs. Medium-Term Calendar Spread

3. Medium-Term vs. Long-Term Calendar Spread

4. Short-Term vs. Long-Term Calendar Spread

5. Long-Term vs. Long-Term Calendar Spread

Conclusion

The five strategies outlined above provide a range of options for targeting a 2% movement in the stock price while minimizing the risk of shares being assigned. By selecting strike prices near the current level and pairing them with different expiration dates, we can maximize potential profits while balancing time decay and volatility risks.

Similar Companies in Discount Stores:
Report: Walmart Inc. (WMT), Walmart Inc. (WMT), Dollar Tree, Inc. (DLTR), BJ's Wholesale Club Holdings, Inc. (BJ), Report: Target Corporation (TGT), Target Corporation (TGT), Dollar General Corporation (DG)

https://www.forbes.com/sites/pamdanziger/2025/01/22/costco-teamsters-vote-to-strike-challenging-costcos-pro-worker-stance/

https://www.youtube.com/watch?v=z1rZpEyxNa0

https://www.fool.com/investing/2025/01/24/3-richly-valued-stocks-ill-be-watching-like-a-hawk/

https://www.proactiveinvestors.com/companies/news/1065029

https://www.forbes.com/sites/pamdanziger/2025/01/24/costco-shareholders-overwhelmingly-support-companys-dei-policies-as-other-major-retailers-retreat/

https://www.fool.com/investing/2025/01/25/costco-has-soared-35-over-the-last-12-months-heres/

https://www.benzinga.com/markets/equities/25/01/43220199/costco-ditches-pepsi-for-coca-cola-in-major-food-court-supplier-switch-reinforces-1-50-hot-dog-c

https://www.fool.com/investing/2025/01/27/best-stock-to-buy-right-now-altria-vs-costco/

https://finance.yahoo.com/news/beyond-market-price-uncovering-costco-110220811.html

https://finance.yahoo.com/m/bd6acd23-1e9c-3f97-a0ef-1bf7fcc02650/target-concludes-three-year.html

https://finance.yahoo.com/news/why-costco-cost-one-best-124351356.html

https://finance.yahoo.com/m/d6b85ce0-2f11-308b-ba65-759a14005ed3/best-stock-to-buy-right-now%3A.html

https://finance.yahoo.com/news/coca-cola-notches-costco-size-153034839.html

https://finance.yahoo.com/news/costco-making-big-food-court-172200398.html

https://finance.yahoo.com/news/3-blue-chip-retail-stocks-200000932.html

https://www.sec.gov/Archives/edgar/data/909832/000090983224000079/cost-20241124.htm

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