COST heads into its September 24 earnings window with its most striking signal coming not from short sellers — who are actually trimming — but from a sharp options repositioning that stands in direct contrast to where this stock was just two weeks ago.
The options story has flipped decisively. The put/call ratio collapsed to 0.94 on Tuesday, a full 3.6 standard deviations below its 20-day average of 1.23. That is the lowest reading of the past year, against a 52-week floor of 0.74, and it marks a complete reversal from the cautious, hedge-heavy positioning that characterised COST options through most of August. Two weeks ago this note flagged that the PCR was running well above average. It has now plunged through the floor. Call buying — or put liquidation — has accelerated sharply in a single session. That kind of z-score move rarely shows up without a catalyst or a meaningful shift in sentiment.
Short positioning has also reversed course, and that update is material given recent reporting. The prior two notes highlighted that bears had built their largest position in the 90-day dataset and had not backed away. They have now started to. Short interest dropped roughly 3.6% on Tuesday and is down 2.6% on the week, pulling back to 1.68% of the free float — still low in absolute terms, but the direction has changed. The borrow market tells the same story: cost to borrow eased 30% over the week to just 0.33%, and availability remains effectively unlimited with the lending pool nowhere near constrained. Bears who rebuilt aggressively over August appear to be taking profits or reconsidering.
The price action is less clean. COST closed at $960, up just fractionally on the week (down 1.2% Tuesday alone), which means the stock is back in the contested zone around the $951–$961 breakout level it has repeatedly tested. WMT fell another 8.5% on the week, extending last week's selloff, making the warehouse and big-box category a clear source of sector-level pressure. KR added 3.7% and BJ gained 1.8%, continuing the pattern where quality-focused warehouse names hold better than the broad peer group. That COST is roughly flat in a week when WMT dropped almost 9% is a form of relative outperformance, however muted it looks on the tape.
The Street remains broadly constructive, with the mean price target from the most recent coverage cluster sitting near $1,077 — roughly 12% above current levels. The most recent action was JP Morgan trimming its target slightly to $1,100 in early July while maintaining Overweight, suggesting the bull thesis is intact but becoming more selective on valuation. A PE above 43x and EV/EBITDA near 27x leave little margin for a stumble, and Citigroup's June reinstatement at Neutral around $1,020 frames the range of conviction well: bulls see a quality compounder worth owning into $1,200, bears see a stock where the membership model is fully priced. The ORTEX short score is a benign 32, and days-to-cover near 4.4 means any squeeze dynamics remain theoretical at these short interest levels.
With the next earnings print on September 24, the combination of a collapsing put/call ratio and a retreating short position sets up an interesting pre-earnings window — one where the question is less whether the bull thesis holds and more whether call buyers at the week's lows are positioned ahead of the print, or simply rotating out of the defensive hedges that defined August.
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