COST trade ideas
October 5 Earnings: Costco- Will eCommerce Ware Off Competition?Costco reports on Thursday, October 5th after the closing bell.
Heading into earnings, the company has a fairly straight forward R/R portfolio:
- Costco enjoys being a major retailer in the US with a wide array of products in multiple markets.
- The company's eCommerce capabilities are picking up steam and contributing meaningfully to revenue. eCommerce global expansion is aiding sales growth.
- Costco's membership club is expanding and drawing in customers in the US and globally.
- The overall market is a fierce competitive one, with giants like Wal-Mart $WMT and Target $TGT, among others, fighting for every consumer.
- Consumer spending, although picking up from highs, remains at a sluggish growth rate, hurting industry prospects.
I believe the pros will outweigh the cons for the expected quarter and Costco will beat expectations.
Starting Costco with a $178.00 Price Target for the post-earnings price action.
THE WEEK AHEAD: COST, BBRY, TEVA, MATEarnings
COST announces earnings on Thursday after market close. With a background implied volatility of 21%, it doesn't meet my basic earnings play sniff test, but naturally that can increase running into earnings, so it may be worth keeping an eye on.
Preliminarily, the Oct 20th 158/170 short strangle currently pays 2.21 at the mid with break evens around the 1 standard deviation line for both sides. The defined risk version of that play, a 155/158/170/173 iron condor, brings in 1.00, with break evens wide of the expected on both sides. (I looked at using the Oct 13th expiry to take maximum advantage of any vol contraction post-earnings, but strikes where I would want to set up my tent were less than ideal).
Non-Earnings
Post-earnings, BBRY implied volatility remains fairly high at 46.25%, placing it in the upper one quarter of the where it's been over the past 52 weeks. Given the size of the underlying, the only play that makes sense from a nondirectional standpoint is a Nov 17th 11 short straddle, which is paying 1.24 at the mid with break evens at 9.75 and 12.25.
The generic drug maker TEVA's implied is at 51.31%, which is around the middle of its range over the past 52. It's not quite where I'd like to see it, and the Nov 17th 15/20 short strangle is only paying .80 at the mid with break evens short of the 1 standard deviation line In contrast, the Nov 17th 17.5 short straddle is paying 2.46 with break evens wide of the expected on both sides, but the comparable iron fly -- a Nov 17th 12.5/17.5/17.5/22.5 only pays 2.20, short of the one-quarter of the width of the longs I like to get out of those. For those looking to strategically acquire shares or to just sell directional premium, the 30 delta Nov 10th 16 short put is paying .52 at the mid with a break even of 15.48.
Toy maker MAT has the right rank/implied metrics here, but with earnings a mere 17 days out, the preference is wait to put on a play shortly before earnings to take maximum advantage of vol contraction.
Exchange-Traded Funds
These are my bread and butter trades, but there's little bread and no butter here. The highest implied volatility exchange traded fund is EWZ at 31.43%, but it's in the lower one-fourth of where it's been over the past year. GDXJ follows with 29.93%; XOP, 25.96%; GDX, 23.25%; and OIH, 24.21%, all at the bottom end of their ranges and, in any event, below 35% implied generally.
VIX et al.
VIX finished Friday at sub-10 levels and its "little buddies" (VXX, UVXY, SVXY) continue to be cannibalized by contango. Sit on your hands for any VIX "Term Structure" trade (the first /VX future trading at >16 is in April) and wait for a VXST/VIX ratio pop to greater than 1.15 (Friday finish: 83.6) to put on plays in VXX, UVXY, and/or SVXY.
$COSTJust support and resistance
im naturally long but $COST has some hurdles it needs to clear before breaking out...
COST breaking through the 200 MACOST broke through the 200 MA and recent resistance line which is pretty bullish. Look tomorrow for confirmation of continuation.
COSTCO SUPPORT LINES I make stock analyses before the opening, these levels i draw are strong support/resistance and are the most powerfull on the same day. So i use them the moment when the market opens
You can see somethimes i use 2 - 3 levels because i dont know where the market will open.
So how i use them, when the market open i see witch levels are still valid if it gaps above or under my level this one cannot used anymore.
When price does come close to my level i place a limit order.
time frame i use are 5-10 min candles if price close right under or below the level with few penny's its of the table ! my risk reward ratio is 2:1 would be good to use trial these are scalp trades in high illiquidity market conditions !
Costco DiscountI wish I had been paying closer attention to this especially during that failed high and Ghidorah deformed H&S.
Nice entry levels at failed high and breaking of lows after a bearish Island reversal
Paying attention to the 20D and if it "holds". Looks slightly bullish
Short Put Spread in High IVHigh IV in $COST
Sept 15 140/155 Put Spread for $2.03.
2x stop loss, 50% win mgmt.
COST cypher finally workedThe 150.90 buy finally got my 1:1 kick, so what's next is to trail the other half.
Adjusting the out from 141.99 to 151.44 may be a good idea as it's the latest HL and a protection for my cost (yes, my cost of COST lol)
86% probability trade on Costco (Ratio Spread)
After last earnings Costco had a 14% down move. If we take into consideration last year, we have a CVPOC at around $150 Price, and in the shorter term the VPOC is around $167 (2017). That means that those prices are the ones that have traded the most and considered fair for the stock.
With an IV Rank at 67 we can sell some premium, so given the down move I sold a 3:1 Ratio spread for $1.66.
This gives us a max profit of $665 at the $150 level and if it stays above $155 price we would be making $166 at expiration.
Our probabilities of profit are very high at 86%
The trade:
Sell (3) AUG18 155 PUT
Buy (1) AUG18 150 PUT
