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Barchart
Barchart
Mark R. Hake, CFA

A Less-Costly Way to Buy Costco to Gain Leveraged Upside in COST Stock

COST Costco Barchart ITM OTM

Yesterday's Barchart article on Costco Wholesale Corp. (COST) showed that COST stock is cheap. Today's article illustrates an interesting strategy: short one-month out-of-the-money (OTM) COST puts and calls to pay for longer-dated in-the-money (ITM) COST calls.

COST is at $870.32 in morning trading on Dec. 29. I described in the Dec. 28 Barchart article that COST could be worth over 18% more at $1,031 per share ("Costco Has Tumbled Despite Higher FCF and FCF Margins - Time to Buy COST Stock?).

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