On CNBC's "Trading Nation", Todd Gordon of TradingAnalysis.com suggested that investors should consider an options strategy in Costco Wholesale Corporation (NASDAQ: COST). He said he thinks the stock is going to return to its highs after the recent pullback.
The implied volatility in the name is in the overbought status, which means that puts and calls are expensive. The company is going to report earnings on Oct. 3 and Gordon wants to use options to trade the event. He wants to sell the October $290/$285 put spread for a credit of $1.98. If the stock closes above $290 at the Oct. 4 expiration, Gordon is going to collect the premium. If it trades lower, he is going to lose money below $288.02. He can maximally lose $3.02 if the stock drops to $285 or lower.
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