September 19, 2026
Bonus Content: Costco’s Thursday Report Will Tell You Whether to Sell Vol or Buy Tail Risk
Reader,
Oil is trading above $100.
Vessel seizures are occurring in contested shipping lanes.
And a key global oil transit corridor is under strain.
Yet equity markets appear to be treating this as a transitory event.
That divergence is where asymmetric setups tend to emerge.
Nearly 20% of global oil supply flows through the Strait of Hormuz.
Right now, that flow is anything but certain.
Even modest disruptions can ripple through the entire market.
The repricing is already visible in spot prices.
But instead of trying to predict oil’s next move…
Some investors are focusing on the infrastructure behind it.
Pipelines. Transport. Distribution.
The “toll roads” of energy.
Because no matter where oil prices go…
It still has to move.
And every time it does, these assets generate cash flow.
Marc Lichtenfeld recently outlined why this setup warrants attention at current levels.
One such partnership yields around 6.8% — well above the S&P 500 — and has raised payouts for decades.
It’s not about calling oil’s direction…
It’s about generating income while it moves.
Good investing,
Rachel Gearhart
Publisher, The Oxford Club
P.S. Markets may be calm today — but a single escalation along this corridor could shift the picture quickly.
Costco’s Thursday Report Will Tell You Whether to Sell Vol or Buy Tail Risk
Costco reports fiscal Q4 earnings after the close on Thursday, September 24. Wall Street expects revenue of $94.85 billion, up 10% from $86.16 billion last year. Analysts are also bracing for adjusted EPS to rise 12% year-over-year to $6.55, from $5.87. Both numbers are achievable. The real question sitting in front of options traders right now is not whether Costco beats, but whether the options market has mispriced the size of whatever comes next.
The Gap That Defines the Trade
Options set to expire on September 24 imply a roughly 3.5% move, or about $31.60 in either direction post-earnings, which is notably larger than Costco’s average post-earnings move of 1.42% over the past eight quarters. That spread is the entire thesis. At first glance, the case for selling volatility looks compelling: if the stock has only moved 1.42% on average, the options market looks wildly generous.
Except the recent record cuts the other way. The last three major COST earnings events have all produced actual moves that exceeded the implied move: shares dropped about 6% against a roughly 5% implied in March 2025, fell about 5% against a roughly 4% implied in September 2025, and declined about 4% against a roughly 3% implied on the May 28, 2026 Q3 release. The options market has been consistently undershooting. That eight-quarter average of 1.42% is being dragged down by the calm quarters that preceded this more turbulent run.
What Makes Thursday Harder to Read
Costco walks into this report carrying contradictory signals. Retail sales jumped 1.2% in August after a 0.5% drop the prior month, providing a tailwind for any retailer reporting fiscal quarter results that cover the summer. Costco also reported comparable sales growth in the fourth quarter earlier this month, a number that, on its own, looks solid.
But the cost side is deteriorating. Oppenheimer analyst Rupesh Parikh sees a possibility of an earnings miss from Costco’s main business, while RBC Capital’s Steven Shemesh has flagged higher fuel and transportation costs that could impact profit margins. And there is something more immediate: Costco raised the price of its Kirkland Signature full-synthetic motor oil and began limiting purchases, with a 10-quart case jumping to $57.99 from roughly $30 last year as a global lubricant shortage tied to the Middle East conflict pushes crude toward $100 a barrel. Stores are capping purchases at two units per customer per week. That is not a minor footnote. It signals supply chain stress inside Costco’s own operations, exactly the kind of detail that can turn a headline beat into a guidance-driven sell-off.
The Strategy Worth Considering
Costco’s shares are only up about 4% year-to-date and have underperformed the broader U.S. stock market. The stock has a 52-week low of $844.06 and a 52-week high of $1,096.50, which means it is currently sitting closer to the lower end of that range. A stock near multi-month lows, with a cost structure under pressure and a Q3 near-miss already behind it, is not the same animal as a stock reporting from strength.
Given the directional uncertainty and the historically proven tendency for COST to overshoot the implied move to the downside, a long put or a put debit spread expiring the week of September 26 offers the cleaner asymmetry. The debit spread structures the risk explicitly: you pay a defined premium, you know the max loss before the trade opens. If the stock repeats its recent pattern and falls harder than what the market implies, a put spread centered around current levels captures that.
The Beast Verdict
Selling the volatility gap sounds appealing on paper. But three consecutive quarters of realized moves that exceeded the implied move is not noise. The margin headwinds are real, the stock has not reclaimed its highs, and a richly valued retailer trading near 45x forward earnings has limited tolerance for even a modest guidance trim. On the May 28, 2026 Q3 report, Costco posted EPS of $4.93, slightly below consensus, and the stock fell about 4% on the day. That is what a near-50x multiple does when something goes sideways, even slightly. Thursday night is not the moment to assume calm returns. It is the moment to define your risk before it defines itself for you.
