Put selling appears to be the trade of the day, as we see the strategy leading Costco’s option activity.
The action is focused on the COST March Weekly 109 puts that expire on March 14, where more than 5,400 contracts have been sold, with the largest block of 4,715 going for the bid price of $1.30. Volume is 10 times the previous open interest, so this is clearly new positioning.
Traders sell puts when they are confident that the stock won’t push much below the strike price, in this case $109, so that they can keep the credit as profit. But some investors use the strategy with the intention of buying the stock on a pullback as well.
Photo: Stu Pendousmat
— Option Monster