Costco Wholesale Corp. (COST)
Update 5/26/2017: COST gapped to the outside after earnings were published and then retraced a portion of the rise. I exited a week before options expiration, at 24.9% of maximum potential profit.
Shares rose by 2.0% over one day, or a +746% annual rate. The options position produced a 33.2% yield on debit for a +12,102.63% annual rate.
COST publishes earnings on Thursday after the closing bell.
I shall use the series of weekly options that trade for the last time eight days hence, on June 2.
Implied volatility stands at 19%, which is 1.9 times the VIX, a measure of the volatility of the S&P 500 index.
COST’s IV stands in the 52nd percentile of its annual range and the 94th percentile of its most recent broad movement.
The price used for analysis was $174.63.
The premium is 51% of the width of the position’s wings.
The risk/reward ratio is 1:1.
Decision for My Account
I have entered an order on COST as described above. The stock at the time of entry was priced at $174.50.
By Tim Bovee, Portland, Oregon, May 25, 2017