Trade Alert - (COST) April 17, 2025 - EXPIRATION AT MAX PROFIT

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.

 

 

Trade Alert - (COST) – EXPIRATION AT MAX PROFIT


EXPIRATION of the Costco (COST) April 2025 $840-$850 in-the-money vertical Bull Call debit spread at $10.00

 

Closing Trade

4-17-2025

expiration date: April 17, 2025

Number of Contracts = 13 contracts

Like all successful trades, this one looks stupidly cautious with 20:20 hindsight and (COST) trading at $965.85. That puts us $115.85, or 13.62% above the nearest $850 strike price.

As a result, you get to take home $1,950. Well done, and on to the next trade.

You don’t have to do anything with this expiration.

Your broker will automatically use your long position to cover your short position, canceling out the total holdings.

The entire profit will be credited to your account on Monday morning, April 21, and the margin freed up.

Some firms charge you a modest $10 or $15 fee for performing this service.

The flight of money right now is from small, undercapitalized, and questionable to large, overcapitalized, and rock-solid balance sheets.

My late mentor at Morgan Stanley was a grizzled old Marine named Barton Biggs, who created the now hugely profitable asset management division some 40 years ago. He was close friends with Sam Walton, the founder of Walmart, and Sam Walton was a huge admirer of Costco, which was just starting up then. Sam used to sneak into Costco’s and take notes on everything they were doing right and then call the founders and compliment them on a job well done. I’m surprised Wal-Mart never took over the company, which is too big to take over now. Costco is still the same company today.

If we had a different president of the United States, I would be recommending a two-year LEAPS on Costco right now. But the world is too uncertain and unstable to contemplate such long-term risk now. I‘ll wait for the recession versus depression to get settled first.

As far as I know, Costco has no government contracts that can get called any day without notice, a great risk to any share price these days.

Costco Wholesale Corporation operates a chain of membership-only big box warehouses (I am a member). As of 2021, Costco is the third-largest retailer in the world. As of 2024, Costco is the world's largest retailer of beef, poultry, organic produce, and wine, and just under one-third of American consumers regularly shop at Costco warehouses. Costco is ranked #11 on the Fortune 500 rankings of the largest United States corporations by total revenue.

Costco originally began with a wholesale business model aimed at enrolling businesses as members, then also began to enroll individual consumers and sell products intended for them, including its own private label brand.

Costco's worldwide headquarters are in Issaquah, Washington, an eastern suburb of Seattle, although its Kirkland Signature house label bears the name of its former location in Kirkland, WA. The company opened its first warehouse (the chain's term for its retail outlets) in Seattle in 1983. Through mergers, however, Costco's corporate history dates back to 1976, when its former competitor Price Club was founded in San Diego, CA.

As of November 2024, Costco operates 890 warehouses worldwide: 616 in the United States and Puerto Rico, 109 in Canada, 41 in Mexico, 36 in Japan, 29 in the United Kingdom, 19 in South Korea, 15 in Australia, 14 in Taiwan, 7 in China, 5 in Spain, 2 in France, 1 in Iceland, 1 in New Zealand, and 1 in Sweden.

To learn more about the company, please visit their website at https://www.costco.com

This was a bet that Costco would not fall below $850 by the April 17 option expiration in 19 trading days.

Here is the specific accounting you need to close out this position:

EXPIRATION of 13 April 2025 (COST) $840 calls at………….……..…$125.85

EXPIRATION of short 13 April 2025 (COST) $850 calls at……………$115.85

Net Proceeds:…………………………………….………..………....................…$10.00

Profit: $10.00 - $8.50 = $1.50

(13 X 100 X $1.50) = $1,950 or 17.64% in 19 days.