Bulls ring up profits in $COST

Upside option traders have doubled their money in Costco.

On July 2, Investitute’s proprietary programs showed that 3,000 Weekly $207.50 calls expiring on July 27 were bought for $4.20 as part of a bullish spread with shares at $207.32. This was clearly new positioning, as open interest in the strike was a mere 90 contracts before the activity appeared.

Those calls traded up to $9.30 today, more than twice their purchase price. The stock rose 4.26% in the same time frame, illustrating the kind of leverage that options can achieve.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

COST was up 1.18% to $216.54 today. The warehouse wholesaler reported solid same-store sales earlier this week.