Costco Just Got Crushed on Earnings and Mike Butler Immediately Bought It for $425

Added: 2026-05-30

[00:00:00]What's up everyone? Mike here for a trade for you for options trade today and I'm looking at Costco. They just released earnings and it wasn't all that great. Was surprising to me. Costco was at a thousand in terms of the stock price and the expected move for earnings was actually less than 30 points, less than 3% of the stock price and that is really low for an implied volatility for an earnings announcement regardless of the size of the stock. So Costco's down 45 points. They're actually outside the expected move to the downside, down 4 and 1/2% sitting at 950 now and it's just been a selling fast in Costco.

[00:00:38]You've you've had it go as high as 1,100 and this will be the eighth day in a row almost that we see just selling, selling, selling bringing us all the way back to what is this? February 2nd levels, early February levels. So I really like buying the dip in Costco here for a couple of reasons. I think when you look at the probability of an interest rate hike and just the probability of inflation staying in this market, you've got crude oil prices elevated and they're projected to be continue continually elevated here. If we have crude oil prices in between 80 and 90 dollars a barrel for the rest of the year, that's going to permeate through the entire market. You could see even more inflation, cost of goods going up and I feel like Costco's just one of those places. If you think of Costco like a Walmart, like a Target, something like that where you have the ability to save a little bit of money going to Costco relative to somewhere else. I kind of like the idea of buying the dip here especially on such a huge sell off relative to the rest of the market. A lot of these tech stocks are flying.

[00:01:41]Costco is not.

[00:01:42]Another thing that I like about this trade and just going a little bit more long term. I did this in Microsoft when Microsoft continued to sell and Costco's getting into that territory where this thing is just getting sold aggressively.

[00:01:56]We're at the bottom of this Bollinger band here to the downside, which is just a a range of, you know, where the market could go given certain inputs. But, really at the end of the day, I like the setup of going long September, short August with just a a simple calendar spread here at 1,100. Uh I like going to September because they just announced earnings end of May.

[00:02:18]Their next earnings announcement will likely be at the end of August, maybe beginning of September. You can see there's a little bit of a vol spike here in September. Uh if it's after September, if it happens to be, that won't be great for the strategy, but if they announce earnings prior to September 18th, this long option that we bought will hold on to a lot of extrinsic value, especially if Costco just chops around here, and I'll have the ability to roll the short option in August that I have sold right now into the earnings weekly cycle and really reduce cost basis uh by rolling into the earnings announcement. So, I like the way that this sets up, and also, buying a September option 100 days out, selling the August 80 days out, creates a really low debit. And when you look at the cost uh curve analysis here, if we just isolate this one trade that I have on, uh you can see if I push this to, you know, end of June, let's say. Let's go to the end of June, the dead of summer. Uh you can see here, even if we just chop right here, the short option's premium will offset the decay in the long. But, if we do get a rally back to 1,000 or or 1050, something like that, this is going to be well over 100% return on debit with a debit of 425. So, the fact that this is such a cheap trade just gives me a really wide range of opportunity here.

[00:03:41]And again, if they announce earnings that are going to be before the 18th of September, that gives me another out of rolling the short call into the earning cycle, picking up a couple more dollars, and reducing the spaces even more. So, I really like the way that this sets up.

[00:03:56]425, nice number here. Just got filled at uh that price point. So, again, bought the September cycle, 1,100 strike, and I sold the August against it. My play here is ultimately to just catch a bounce in Costco to 1,000 or 1050. If we do that, I'll close the trade and we'll be good. But if not, if they put their earnings announcement pre-September 18th, we'll be able to hold on to extrinsic value in the long.

[00:04:23]We'll get still get that full decay in the August cycle because earnings will be after the August 21st cycle. And uh we should be able to roll into the earnings announcement if we can kind of catch the middle there. But all things considered, really low debit, buying the dip here in a longer-term way. Still cheap though from a risk standpoint.

[00:04:40]Costco's down 5%. I kind of love buying the dip here. It's been chopping around this level for quite some time. So, uh we might have an opportunity to catch a little bounce here, maybe 50 100 points to the upside, and that would be great for this trade. But let me know what you think in the comments below.

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