OPENING ORDER 3tw – COST PUT SPREAD
Core Details:
Order Type: Limit Order to open at $2.13 debit
Trade Type: Vertical Put Spread (Debit)
Contracts:
Buy 1x February 20 $940 PUT
Sell 1x February 20 $935 PUT
Net Debit: $2.13 per spread
Ticker: COST (Costco)
Here’s What to Do Next:
To execute this trade, navigate to the trading platform and initiate a vertical put spread order in the model portfolio for COST. Select the February 20 expiration. Choose the $940 put to buy and the $935 put to sell, both with the same expiration date. Enter the desired quantity (1 contract per leg), confirm the net debit price is set to $2.13, select “Limit” as the order type, and submit the order to open the position.
Why I’m Taking Action:
Costco has surged over 10% year-to-date and has exceeded its weekly expected move for two consecutive weeks—a strong signal that the stock may be overextended in the short term. Given the speed and magnitude of this rally, a near-term pullback could be warranted. This put spread is positioned to benefit from such a move. The trade uses a longer-dated February expiration to allow more time for the thesis to develop, especially as implied volatility remains relatively low around 20%, helping manage the premium cost of the position.
