Traders Betting Against Costco (COST) with Puts

12/28/2009 10:45 am EST


Nick Perry

Equity Options Trader, Schaeffer's Investment Research

Put trading was heavy on Costco Wholesale Corporation (COST) recently, as the stock saw more than 15,700 put contracts change hands. This put volume was nearly four times the equity's average daily put volume.

Put trading has been relatively popular on the shares during the past couple of weeks. The International Securities Exchange (ISE) has seen nearly two puts purchased to open for every one call purchased to open during the past two trading weeks. This ratio of puts to calls is higher than 81.3% of all those taken during the past year, pointing to a growing pessimism among options players. What's more, the ISE/Chicago Board Options Exchange (CBOE) ten-day put/call volume ratio comes in at 1.64, which is higher than 78% of all those taken during the past year.

In addition, the Schaeffer's put/call open interest ratio comes in at 1.33, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio is higher than 75% of all those taken during the past year, indicating that options players have been more pessimistically aligned toward the shares only a quarter of the time.

Technically speaking, the security has climbed more than 14% since the beginning of the year. The stock has been in an uptrend since its mid-March low of $38.18 along the support of its ten- and 20-week moving averages.

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By Nick Perry of Schaeffer’s Trading Floor Blog

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