Core Insights - Costco Wholesale Corp. (COST) stock is currently considered undervalued, with a potential upside of over 18% to a target price of $1,031 per share [1]. Investment Strategy - A suggested strategy involves shorting one-month out-of-the-money (OTM) puts and calls to finance the purchase of longer-dated in-the-money (ITM) calls [1]. - The current trading price of COST is $870.32, which requires a significant capital outlay of $87,255 to buy 100 shares [3]. Options Trading - Buying one-year ITM call options is a more cost-effective approach, with the $850 strike price call option trading at $111.03, resulting in a total cost of $11,103 for 100 shares [4][5]. - The intrinsic value of the call option is $20.30, leading to a net "real" cost of $90.73 after accounting for this intrinsic value [6][7]. Expected Returns - If COST rises to the target price of $1,031, the expected return (ER) from the ITM call option would be 63%, significantly higher than the 18% ER from a buy-and-hold strategy [7]. Cost Reduction Strategy - Once an investor has exposure to 100 shares of COST, they can further reduce costs by shorting OTM calls, such as the $915 strike price call option expiring on January 30, 2026, which has a midpoint premium of $6.38 [9].