Earn Some Loot in Square Options

Posted On June 27, 2017 1:44 pm

Square (SQ) is the ‘other’ company founded and run by Jack Dorsey, but unlike the much maligned Twitter (TWTR), Square’s mobile payment platform has enjoyed strong growth and a quick path to profitability.

For the first quarter, Square’s revenues grew 22% over the year to $462 million, ahead of the Street’s expectations of $451 million. Its platform processed $13.6 billion of gross payment volume, recording a 33% growth over the year.

Square has been pushing its international expansion and intensifying its focus on larger retailers instead of individual sellers. Recently, it launched Square for Retail, a mobile point-of-sale platform focused on the smaller and medium retailers. It is already seeing improved results from this focus. Within its seller mix, 43% of Square’s merchants process over $125,000 in annualized GPV compared with 34% a year ago. Besides generating more business, the larger retailers are also prone to demand more value-added services Square sells, such as invoicing, Instant Deposit and working capital.

Chart Consolidating in Bullish Triangle

Shares ran up fast heading into the May 3 earnings report and then continued higher after the company delivered beats on both top and bottom line—probably getting a bit extended with many of the other hot tech names.

But it has now had a healthy consolidation after the ‘tech wreck’ on June 9, holding support at the 20 dma along the $23.50 level. The triangle suggests a breakout to new highs could be coming.

Implied volatility for its options has moved towards the low end of its 52 week range.

  • I’m buying a few calls outright.
  • I’ll look for an exit on a 100% increase in the options value. Manage risk by exiting if shares close below $22.80 or options lose 50% of their value.

-Buy to open 3 contracts July Monthly 23 calls at $1.55 (do not go above $1.60)

About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.