10 Updates

One Put, One Call Option To Know About for Costco Wholesale (COST)

May 12 2014, 11:25am CDT | by

Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is Costco Wholesale Corp (NASD: COST ). So this week we highlight one...

Filed under: news

 
 
 

10 weeks ago

One Put, One Call Option To Know About for Costco Wholesale (COST)

May 12 2014, 11:25am CDT | by

Consistently, one of the more popular stocks people enter into their stock options watchlist at Stock Options Channel is Costco Wholesale Corp (NASD: COST ). So this week we highlight one interesting put contract, and one interesting call contract, from the June expiration for COST.

The put contract our YieldBoost algorithm identified as particularly interesting, is at the $114 strike, which has a bid at the time of this writing of $1.51. Collecting that bid as the premium represents a 1.3% return against the $114 commitment, or a 10.5% annualized rate of return (at Stock Options Channel we call this the YieldBoost).

Click here to find out the Top YieldBoost COST Puts »

Selling a put does not give an investor access to COST’s upside potential the way owning shares would, because the put seller only ends up owning shares in the scenario where the contract is exercised. So unless Costco Wholesale Corp sees its shares fall 2.2% and the contract is exercised (resulting in a cost basis of $112.49 per share before broker commissions, subtracting the $1.51 from $114), the only upside to the put seller is from collecting that premium for the 10.5% annualized rate of return.

Interestingly, that annualized 10.5% figure actually exceeds the 1.2% annualized dividend paid by Costco Wholesale Corp by 9.3%, based on the current share price of $116.55. And yet, if an investor was to buy the stock at the going market price in order to collect the dividend, there is greater downside because the stock would have to lose 2.19% to reach the $114 strike price.

Always important when discussing dividends is the fact that, in general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Costco Wholesale Corp, looking at the dividend history chart for COST below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.2% annualized dividend yield.

Turning to the other side of the option chain, we highlight one call contract of particular interest for the June expiration, for shareholders of Costco Wholesale Corp (NASD: COST ) looking to boost their income beyond the stock’s 1.2% annualized dividend yield. Selling the covered call at the $118 strike and collecting the premium based on the $1.59 bid, annualizes to an additional 10.8% rate of return against the current stock price (this is what we at Stock Options Channel refer to as the YieldBoost), for a total of 12% annualized rate in the scenario where the stock is not called away. Any upside above $118 would be lost if the stock rises there and is called away, but COST shares would have to climb 1.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 2.6% return from this trading level, in addition to any dividends collected before the stock was called.

Click here to find out the Top YieldBoost COST Calls »

The chart below shows the trailing twelve month trading history for Costco Wholesale Corp, highlighting in green where the $114 strike is located relative to that history, and highlighting the $118 strike in red:

The chart above, and the stock’s historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the June put or call options highlighted in this article deliver a rate of return that represents good reward for the risks. We calculate the trailing twelve month volatility for Costco Wholesale Corp (considering the last 251 trading day COST historical stock prices using closing values, as well as today’s price of $116.55) to be 15%.

In mid-afternoon trading on Monday, the put volume among S&P 500 components was 651,182 contracts, with call volume at 1.19M, for a put:call ratio of 0.55 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today.
Find out which 15 call and put options traders are talking about today ./>

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakya ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

Melbourne Rising Media Launch
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by robbers ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat today. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammuddin Hussei ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last month. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 mil ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri M ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an all ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan B ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Bacteria linked to obesity and diabetes found
New York, July 25 (IANS) Biologists have discovered an extremely widespread virus that could be as old as humans and could play a major role in obesity and diabetes.
 
 
Background TV can impact kids' future
Washington, July 25 (IANS) Do you watch your favourite television show after assigning homework to your kids? This may have a bearing on theirn learning and their success in future.
 
 
Night lights can wake up breast cancer cells
New York, July 25 (IANS) Sleeping at night with the lights on can not only add to your energy consumption, but also wake up breast cancer cells, a study suggests.
 
 
Men in shift work at higher type 2 diabetes risk: Study
New York, July 25 (IANS) Men who works in shift are at higher risk of developing type 2 diabetes, a study warns.
 
 
 

Latest from the Network

Bacteria linked to obesity and diabetes found
New York, July 25 (IANS) Biologists have discovered an extremely widespread virus that could be as old as humans and could play a major role in obesity and diabetes. More than half the world's population is host to...
Read more on Apple Balla
 
Background TV can impact kids' future
Washington, July 25 (IANS) Do you watch your favourite television show after assigning homework to your kids? This may have a bearing on theirn learning and their success in future. Researchers have found that...
Read more on Apple Balla
 
Wiggins says he is done with cycle road racing
Glasgow, July 25 (IANS) England's cycling star Bradley Wiggins said he was done with road racing and would never participate in the Tour de France. Wiggins, who won a Commonwealth Games silver medal Thursday as...
Read more on Sport Balla
 
Night lights can wake up breast cancer cells
New York, July 25 (IANS) Sleeping at night with the lights on can not only add to your energy consumption, but also wake up breast cancer cells, a study suggests. Exposure to light at night, which shuts off night-time...
Read more on Celebrity Balla
 
Men in shift work at higher type 2 diabetes risk: Study
New York, July 25 (IANS) Men who works in shift are at higher risk of developing type 2 diabetes, a study warns. The reasons for this finding are not clear, say the authors, but suggest that men working shift...
Read more on Business Balla
 
Baldwin refuses to apologise for misconduct
New York, July 25 (IANS) Actor Alec Baldwin would "rather pay a fine" than apologise for allegedly bad-mouthing police officers in May. The 56-year-old actor appeared in a Manhattan court Thursday in relation to a...
Read more on Celebrity Balla
 
Two Pakistan policemen killed in militant attack
Islamabad, July 25 (IANS) At least two policemen were shot dead by militants Friday in Pakistan's Balochistan province. According to a police official, the militants attacked the policemen in the New Sariab area of...
Read more on Politics Balla
 
Aniston, Theroux want wedding by the ocean
Los Angeles, July 25 (IANS) Actors Jennifer Aniston and Justin Theroux reportedly are planning to have their wedding "by the ocean". The couple, who began dating in 2011 and got engaged a year later, are keen to tie...
Read more on Celebrity Balla
 
Australia moves asylum seekers to mainland
Canberra, July 25 (IANS) A group of 157 asylum seekers who were detained on an Australian customs ship for more than a month is being transferred to the mainland, Immigration Minister Scott Morrison said Friday. The...
Read more on Politics Balla
 
Queen 'photobombs' Australian hockey players' selfie
Glasgow, July 25 (IANS) A selfie of two Australian women hockey players, Jayde Taylor and Brooke Peris, has gone viral after Queen Elizabeth appeared smiling in the background of their snap. The Queen Thursday...
Read more on Sport Balla