Mike Khouw Sees Unusual Options Activity In Costco

Mike Khouw spoke on CNBC's "Options Action" about options trading in Costco Wholesale Corporation COST ahead of earnings. He said the options market is implying a move of 4 percent on the event, which is higher than the average historical move of 2 percent. It's also a bigger move for the stock than it typically implies going into earnings.

Khouw noticed on Wednesday a purchase of 1,000 contracts of the December 205 puts for $0.50. The trade breaks even at $204.50 or 10.23 percent below the current stock price. The largest decline for the stock after earnings was around 6 percent.