Block and PayPal - Ostensibly Bottomed

Before the massive market rotation and tech-heavy selling, specifically in high beta and richly valued stocks, fintech had been in a multi-year secular growth trend. Recently, high-quality names in the space such as Block (SQ), formally Square, and PayPal (PYPL) have seen their stocks nearly cut in half. Block has come down from $298 to $138 or a 54% drop, while PayPal has come down from $310 to $179 or a 42% drop. All the rage has been about the buy-now and pay-later platforms as a disruptor to the entire payments space. However, Block came through with a $29 billion, all-stock deal to buy Afterpay, a major buy-now, and pay-later platform. Block's acquisition highlights consumers circumventing traditional credit, especially younger buyers, for installment loans. PayPal also offers their version of buy-now and pay-later offering, which showed fantastic growth over the holiday season and a surge of 400% on Black Friday alone.

Both Block and PayPal are firmly in the buy-now and pay-later space while also enabling businesses at the point of sale, analytics, peer-to-peer payments via Venmo (PayPal) and Cash App (Block), small business lending, cryptocurrency transactions, and support traditional credit card integrations into their platforms. Block and PayPal offer end-to-end financial solutions for businesses and consumers while powering the next generation of financial technology. These financial technology companies are creating additional revenue verticals while addressing unmet needs in the financial services space. Both Block and PayPal may offer long-term growth at very reduced valuations due to the tech-heavy selling, when factoring in their end markets are current growth rates. Continue reading "Block and PayPal - Ostensibly Bottomed"

PayPal - Importance Of Risk-Defined Option Trading

Options trading can provide a meaningful addition to one's portfolio when used in a disciplined manner. When used as a component of an overall portfolio approach, generating consistent monthly income while defining risk, leveraging a minimal amount of capital, and maximizing return on capital can be achieved. Options can enable smooth and consistent portfolio appreciation without guessing which way the market will move. An options-based portfolio can provide durability and resiliency to drive portfolio results with substantially less risk via a holistic beta-controlled manner. When engaging in options trading, specific rules must be followed, and one of the most important rules is to structure every option trade in a risk-defined (put spreads, call spreads, iron condors, etc.) manner.

PayPal (PYPL) was a recent example where the stock witnessed a massive meltdown from an ill-advised acquisition target (Pinterest) coupled with quarterly earnings that were deemed dismal. These two events culminated into a 35% slide from a 52-week high of $310 down to ~$200 post-earnings. Hence the importance of risk-defining all options trades to limit any downward stock movement beyond your protection strike. Risk-defined options trading prevents any losses beyond a specific strike price, avoids the assignment of shares, does not require a significant amount of capital, and does not potentially result in unrealized losses while soaking up capital with any share assignments.

Risk-Defined Options Trading

Risk-defined option trades are straightforward. Below is a theoretical example deploying a put spread on a stock that currently trades at $100 per share. Continue reading "PayPal - Importance Of Risk-Defined Option Trading"