DailyPlay – Opening Trade (COST) – October 30, 2024

COST Bearish Opening Trade Signal

Investment Rationale

Costco Wholesale Corporation (COST) recently broke down from its trading range with strong momentum, underperforming the S&P 500 and signaling further downside potential toward our $800 target. Costco is Significantly Overvalued and trades at more than twice the valuation of its peers, despite growth and profitability metrics that are only average within the industry, highlighting considerable downside risks.

COST – Daily

Trade Details

Strategy Details

Strategy: Modified Call Butterfly

Direction: Bearish Modified Call Butterfly

Details: Sell to Open 2 COST Nov 15 $930/$940/$950 Modified Call Butterflies @ $0.49 Credit per Contract. Please carefully consider the amount of Contracts for each leg of this spread, which is (Buy 1x$930 Call) & (Sell 3x$940 Calls) & (Buy 2x$950 Calls) per Contract. Refer to Entering the Trade, right at the bottom where we opened 2 Contracts.

Total Risk: This trade has a max risk of $1,902 (2 Contracts x $951) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $951 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bearish trade on a stock that is underperforming and is expected to continue lower.

1M/6M Trends: Bearish/Neutral

Relative Strength: 9/10

OptionsPlay Score: 250

Stop Loss: @ $0.98 (100% loss to value of premium received)

View COST Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View COST Trade