Dan Nathan Sees Unusually High Options Activity in Costco

Dan Nathan spoke on CNBC's "Options Action" about unusually big options activity in Costco Wholesale Corporation COST. The options volume was three times the average daily options volume and there was one particularly large trade during the day.

When the stock was trading at $160, somebody bought 5,000 contracts of the January 2019, 120 strike puts for $4.35. The trade breaks even at $115.65 or 27.61 percent below the current stock price.

Nathan explained that the trade caught his attention because it's very far out of the money and also because of the size of the trade. The trader paid almost $2.2 million to make a bet that the stock is going to decline more than 27.61 in 20 months.