Listen regards, my next speculation is $COST will split and rip.

I'm the degenerate that bought way OTM calls on $DG and $DLTR because $1 stores are trash and the options were cheap lotto tickets. How you find these plays; get a thesis going, then check for lottery tickets, then manage your risk.

The play? The deepest OTM calls on $COST, at various strikes and dates as follows:

10/4 1040c for $1.67/each
10/18 1200c for $0.40/each
12/20 1300c for $0.69/each.

I started earlier this week with the 980 and 990 calls, but they were up 80% and 33% respectively, so I sold those and loaded up on the above.

I know what you're thinking, "Dude, you're fucking stupid". A little, but besides the point. Here's the thesis.

1) Its fucking Costco. Just look at that chart. Speaking of chart?
2) $COST is the $NVDA of grocery stores, essentially. Better and better every year, since they both opened. Well run companies, good products and financials, blah blah blah. Why compare to NVDA? The split.
3) The strikes on the options chains. DG was a play because the 100p were cheap and was a critical level on the chart. DLTR on the other hand? Yes, the 65p was also at a key level on the chart. But 65 was the lowest strike on the chain.

Think about it. If the stock prices goes higher (or lower) than the highest (or lowest) strike on the chain, the people writing those options have NO hedge.

How? Well, not everyone is a degenerate monkey like we all are. They hedge, instead of zero to hero shit.

For those unfamiliar with options, here's the ELI5 of it. I write (sell to open) an option, I collect the premium (price paid per contract). I get the money; you get the contract. Contract expires, dope, I get 'free' money. Contract goes ITM, I'm boned, now I have to buy or sell 100 shares to fulfill the contract. At a loss. An example.

Say I think WMT will go down by next Friday, to $75. WMT is now $80.60/share.

So, I write a 75c for WMT (sell to open) that expires 9/20 and collect ~$6.10 in premium. 1 of 3 things will happen.

1) WMT hits $75, or below by 9/20. Instead of $5 ITM, it is barely ITM and only worth $1.06/contract. So, I buy one of the contracts for $1.06 to "buy to close". Sold it for $6.10, bought it back for $1.06, I keep the $5.04 in extra premium in my pocket.

2) Stock price does nothing, pretty much all week. The option is still $5 ITM by Friday, but worth less than the $6.10 I wrote it for on Monday. Price is still the same, but now there is less than 24 hours to expiration instead of 5 days. You buy to close the same option back for $3-4, still collect $1-2 in premium.

3) WMT rips to $85, now the option you wrote is $10 ITM and is worth $10. Either it gets exercised and you lose money, or you buy to open another contract for $10 and still lose money.

So, how do you hedge for the possibility of scenario 3? You buy the 80c for $1.06 roughly. If WMT does rip to $85 that week, yes the 75c you wrote is worth $10 instead of $5. But the 80c you bought as a hedge for $1.06 is now $5 ITM and is worth the same $5 you lost on the contract you wrote. That is the hedge

Why bring all of this up like I have any idea of what I'm talking about?

Well, what happens when the $75 is the highest strike on the options chain? You can't buy the 80c for a hedge, because it does not exist.

That is where the play comes in. If COST posts good ER (usually do because they're COST, and increased membership so money money) AND they announce a split on their 9/26 ER? This thing absolutely rips.

IF this happens, $1100 is my price target by 10/4.

This is a BIG IF so position yourself with money you are comfortable seeing go to ZERO.

But if this does work? We can all buy our own Wendy's.

Let us assume that this play works as I'm imagining it and COST hits $1050-$1100/share by 10/4.

• The 10/4 1040c will be $10-60 ITM, ~$17.50-$52.50/each up from $1.67/each
• The 10/18 1200c will be $100-150 OTM instead of $280 OTM. Hard to estimate from options chain, but definitely worth more than the 0.40/each we buy them for. And, by 10/18, those could possibly even be ITM also.
• The 12/20 1300c will also be worth more than we paid for them.

I'll post my positions below in a photo, with some charts.

This is my next play, and I'm putting up 10% of my capital at risk on it.

If you only want one option to keep track of, go with the 10/4 1040c for sure.

Currently, they are $1.67/each. START a position, don't fucking load up on them all at once! Risk only what you're willing to see go to ZERO.

So, whatever 1% of your capital is. Risk that and start the position on Monday. Whether that is 1, 10, or 100 contracts. Fuck it. Only 1-2% of your capital.

After that, watch and observe. Options go down and value and are less than $1.67/each? Then add more. This is what I will be doing, until the total of the bet accounts for 10% of my bankroll. 5% if you want to be conservative, but I'm risking 10% on this one.

tl;dr: I'm regarded and think COST will do a stock split, and will rip past 1060 (to put options writers in an awkward and unhedged position). $COST will rip to $1100 by 10/4, and the 1040c will be $1-$60 ITM. They're only $1.67/each right now, cheap lotto tickets with decent enough odds.