STOCK SHOWDOWN - Writing Covered Calls - PYPL vs SQ

 

Which stock would I buy for Writing Covered Calls - PYPL vs SQ
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DISCLAIMER: This stock comparison is 100% for entertainment. I'm not recommending these stocks as a purchase. The research jump links in this blog post are ones that I use to start my stock investing research. Always do your own due diligence and never risk more money then you are willing to lose. Think of it like this blog post as seeing the world thru my eyes.
COVERED CALL SHOWDOWN! - WHICH STOCK WOULD I PURCHASE TO WRITE A COVERED CALL
PayPal Holdings, Inc.
	PYPL	vs		SQ
Square, Inc.
Seeing the World Thru my Eyes - the Straight Talk
This week 'Stock Showdown' is with PayPal (PYPL) and Square (SQ), two companies that are on the cutting edge of finance ... PayPal being much more respected and acting more like a traditional bank where as Square is now being the millennial Point of Sale system of choice for entrepreneurs ... both have growth opportunities and both are for The New Age of Banking ... let’s see who wins this Stock Showdown
NOTE - AT THE TIME OF THIS POSTING, BOTH COMPANIES STOCK PRICES BELOW
PYPL			SQ
$207.74			$190.47
PayPal Holdings, Inc.			Square, Inc.
Just in case you didn't know ... here's some basic company information about what they do.
PayPal Holdings, Inc. operates as a technology platform and digital payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide. Its payment solutions include PayPal, PayPal Credit, Braintree, Venmo, Xoom, and iZettle products. The company's payments platform allows consumers to send and receive payments, withdraw funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. It also offers gateway services that enable merchants to accept payments online with credit or debit cards, as well as digital wallets. PayPal Holdings, Inc. was founded in 1998 and is headquartered in San Jose, California.			Square, Inc. provides, together with its subsidiaries, payment and point-of-sale solutions in the United States and internationally. The company's commerce ecosystem includes point-of-sale software and hardware that offers sellers to payment and point-of-sale solutions. It provides hardware products, including Magstripe reader, which enables swiped transactions of magnetic stripe cards; Contactless and chip reader that accepts Europay, MasterCard, and Visa (EMV) chip cards and Near Field Communication payments; Square Stand, which enables an iPad to be used as a payment terminal or full point of sale solution; Square Register that combines its hardware, point-of-sale software, and payments technology; Square Terminal, a portable payments device that replaces keypad terminals, ... Square, Inc. was founded in 2009 and is headquartered in San Francisco, California.
Yahoo Summary-PYPL			Yahoo Summary-SQ
#1 - The Golden Rules of Covered Call Writing!
The Golden Rules of Covered Call Writing are subjective ... the basic idea is to avoid as much risk as possible when determining a new stock purchase for a Covered Call Write ... we can not avoid risk entirely but using certain rules or guidelines will help use reduce that risk during the timeframe we use the stock for selling premium. I've included the most popular rules or guidelines below which include: avoid a company's earnings report, is the company apart of the S&P 500 or Dow Jones?. Does the company have a dividend? Does the company have same store sales reports? Do you want to own the stock? > This list isn't the end all be all list but a starter list for your research and lowering your risk ... but again, we can not avoid risk .
PayPal Holdings, Inc.			Square, Inc.
S&P 500?	OPTIONS?	DIVIDEND?	S&P 500?	OPTIONS?	DIVIDEND?
Confirm	Option Chain-PYPL	Verify-PYPL	Confirm	Option Chain-SQ	Verify-SQ
Seeing the World Thru my Eyes - the Straight Talk
Both of these companies are 'S&P' type companies but only PYPL is officially in the S&P500 ...not a deal breaker for me as I would invest in both coming ... no clear winner here if you ask me.
#2 - What story is the chart telling us?
When buying stocks to Write Covered Calls the prime objective is for the stock to trade sideways to higher ... selling premium traders will purchase a stock and sell the Out of the Money strike to collect both the premium and the stock appreciation. I always like to look at a chart and ask the question "what story is this chart telling me?" ... if its trending higher, this is good. If its trending lower, well, I really need to do my research if I'm going to invest in a company that its stock is trending lower.
See Support-PYPL			See Support-SQ
Seeing the World Thru my Eyes - the Straight Talk
I do see a clear winner here with a 'more' steady chart and less volatility ... PYPL has moved up and up and up while SQ has had some '1 step back, 2 steps forward' ... like both charts though as it shows this business type is growing.
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#3 - What are "THEY" saying?
I'm not an expert when it comes to whether a stock is undervalued or overvalued or if its a Buy or a Sell ... so I use some great websites to 'paint a picture' for me. Some will have a stock as a Buy and another will have it as a Sell ... so I usually have 3 or 4 different sources to help me.
PayPal Holdings, Inc.			Square, Inc.
Zacks	Yahoo Prem	AmBull	Zacks	Yahoo Prem	AmBull
HOLD	OVERVALUED	STAY IN CASH	BUY	OVERVALUED	STAY LONG
Corfirm Rating - PYPL	Yahoo Summary-PYPL	Trending? -PYPL	Corfirm Rating - SQ	Yahoo Summary-SQ	Trending? -SQ
Seeing the World Thru my Eyes - the Straight Talk
Clear winner here for me as PYPL has had its move ... now SQ is a mover and WalL Street see's it ... in the short term I feel SQ is getting more love ... but make no mistake ... not much bad news out there on PYPL ... have to give this one to SQ as its chart pattern suggests to STAY LONG!
#4 - SHOW ME THE MONEY!
Another great visual when quickly trying to determine if this/these are companies we want to own ... remember, we have to own these companies and if the picture isn't telling us a clear picture of a companies prospects then I have to make sure I really do my homework.
Yahoo Summary-PYPL			Yahoo Summary-SQ
Seeing the World Thru my Eyes - the Straight Talk
PYPL is acting just like a BIG BANK with that steady Rev growth with Earnings ... notice the rate of earnings has leveled off ... SQ on the other hand seems to have turned profitable and has grown those earnings by double ... clear winner here for me.
#5 - What kind of Covered Call profits can we make?
Giving someone the right but not the obligation to take your shares can be very profitable if done correctly ... typically most Covered Call writers will try to make 3% Cash on Cash profit in a 30 day period. Mastering this skill of selling premium can increase your annual returns vs a buy and hold investment strategy. Below is a (1) deviation Out of the Money Covered Call that one might do if they sell premium.
Looking at a 30 day window using (3) deviationS Out of the Money
	THESE ARE NOT REAL TIME! CLICK LINK BELOW FOR THAT			POSTED >	10/13/2020
PYPL	Current Price	Strike Price	LAST TRADE	30 day return	Expiration
	$207.74	$207.50	$10.50	4.94%	9/18/2020
	$207.74	$210.00	$9.35	5.59%	9/18/2020
	$207.74	$212.50	$5.08	4.74%	9/18/2020
			THIS IS NOT THE BID OR MID
Check this stocks options here >		https://finance.yahoo.com/quote/PYPL/options?p=PYPL
	THESE ARE NOT REAL TIME! CLICK LINK BELOW FOR THAT
SQ	Current Price	Strike Price	LAST TRADE	30 day return	Expiration
	$190.47	$192.50	$13.83	8.33%	9/18/2020
	$190.47	$195.00	$12.70	9.05%	9/18/2020
	$190.47	$197.50	$10.45	9.18%	9/18/2020
			THIS IS NOT THE BID OR MID
Check this stocks options here >		https://finance.yahoo.com/quote/SQ/options?p=SQ
Seeing the World Thru my Eyes - the Straight Talk
Both pay Premiums that would fit the 3% 30 day wheelhouse trade ... SQ is paying fr better but to make 5 / 6% like PYPL is paying ... not much to say negative for either one here ... TIE!
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#7 - "HURRY HURRY, READ ALL ABOUT IT!"
The internet has so many resources for good information on companies ... whether its news, events or just some blogger with a great perspective on a company's prospects ... I love just glancing at the news feeds to get a feel for what's going on with a company I'm researching ... below are some helpful jump links I use.
Seeking Alpha		DivChannel	Seeking Alpha		DivChannel
Alpha Articles Search-PYPL		Verify-PYPL	Alpha Articles Search-SQ		Verify-SQ
MY WINNER IS!!!
	PYPL	vs		SQ
	SCORE		SCORE
	3		5
Seeing the World Thru my Eyes - the Straight Talk Recap!
Square WINS! With both of these companies doing so well these days its really hard to pick one over the other ... I guess if you're looking at a LONG TERM Buy and Hold both could be great investments ... but for the 30 Day Selling Premium trade ... SQ edges out PYPL today ... BOTH are in the DANGER ZONE right now as they both have Earnings coming in the beginning of Nov-2020 ... but after that ... both of these stocks are on my radar.
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The BONUS Deeper Dive!
#8 - More number that help us Up Our Game!
I'm not an expert when it comes to whether a stock is undervalued or overvalued or if its a Buy or a Sell ... so I use some great websites to 'paint a picture' for me. Some will have a stock as a Buy and another will have it as a Sell ... so I usually have 3 or 4 different sources to help me.
FFTY	ST50	S&P 500	FFTY	ST50	S&P 500
-	-		-	-
Does either of these companies have Earnings Report (next 30 days)
November 3, 2020		-		November 5, 2020
~	Nov 03, 2020 - Nov 03, 2020		~	Nov 05, 2020 - Nov 05, 2020
Verify-PYPL			Verify-SQ
Dividend 2%	EX-DATE	Ave Vol	Dividend 2%	EX-DATE	Ave Vol
0.00%	-	7.882M	0.00%	-	11.037M
Verify-PYPL			Verify-SQ
What story is the chart telling you?
StockCharts	Finviz	BarCharts	StockCharts	Finviz	BarCharts
View Chart-PYPL	See Support-PYPL	View Chart-PYPL	View Chart-SQ	See Support-SQ	View Chart-SQ
I hope you enjoyed this Covered Call Stock Showdown blog ... as always you know this is for entertainment and before EVER investing a nickel of your hard earned money you need to do your research or what they call due diligence ... no, nada, zip zilcho stock recommendations were made here ... this ALL should be your STARTING POINT for determining if either of these companies meet your stock investing risk profile. Good luck everyone!
Disclaimer - Yes - at the time of this posting I do have a position in this equity. By posting this I am by no means recommending this equity and am not front running for its performance. I have risked my own money and am accountable for the trade results.
Remember, the content of this site is for informational and educational purposes only. If you invest using information contained here, do so at your own risk. Please read the full disclaimer posted below and visit cptdashboard.com for my privacy policy.
Trading stocks and options have risk. Required reading prior to placing money at risk with options is the ODD which is posted below. "The Characteristics & Risks of Standardized Options" Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options.
- http://www.optionsclearing.com/about/publications/publication-listing.jsp
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Topics I discussion range from:
Using stocks to Write Covered Calls
The Covered Call Investment strategy
Using Covered Calls to earn money
Explaining the Covered Call strategy
Selling Covered Calls
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CREDIT - How and Why to Use a Covered Call Option Strategy
BY ADAM MILTON
Updated July 29, 2019 > https://www.thebalance.com/determining-intrinsic-value-1031125
A covered call is an options strategy involves trades in both the underlying stock and an options contract. The trader buys (or already owns) the underlying stock. They will then sell call options for the same number (or less) of share held and then wait for the options contract to be exercised or to expire.
Exercising the Options Contract
If the options contract is exercised (at any time for US options, and at expiration for European options) the trader will sell the stock at the strike price, and if the options contract is not exercised the trader will keep the stock.
For a covered call, the call that is sold is typically out of the money (OTM). This allows for profit to be made on both the options contract sale and the stock if the stock price stays below the strike price of the OTM option. If you believe the stock price is going to drop, but you still want to maintain your stock position, for the time being, you can sell an in the money call option (ITM).
For this, you will receive a higher premium from the buyer of your call option, but the stock must fall below the ITM option strike price, otherwise, the buyer of your option will be entitled to receive your shares if the share price is above the option's strike price at expiration (you lose your share position). Covered call writing is typically used by investors and longer-term traders, and is rarely used by day traders.
How to Create a Covered Call Trade
Purchase a stock, and only buy it in lots of 100 shares.
Sell a call contract for every 100 shares of stock you own. One call contract represents 100 shares of stock. If you own 500 shares of stock, you can sell up to 5 call contracts against that position. You can also sell less than 5 contracts, which means if the call options are exercised you won't have to relinquish all of your stock position. In this example, if you sell 3 contracts, and the price is above the strike price at expiration, 300 of your shares will be called away, but you will still have 200 remaining.
LEARN MORE
Wait for the call to be exercised or to expire. You are making money off the premium the buyer of the call option pays to you. If the premium is $0.10 per share, you make that full premium if the buyer holds the option until expiration and it is not exercised. You can buy back the option before expiry, but there is little reason to do so, and this isn't usually part of the strategy.
Risks and Rewards of the Covered Call Options Strategy
The risk of a covered call comes from holding the stock position, which could drop in price. Your maximum loss occurs if the stock goes to zero. Therefore, you would calculate your maximum loss per share as:
Maximum loss per share = (Stock entry price - $0) + Option premium received
For example, if you buy a stock at $9, and receive a $0.10 option premium on your sold call, your maximum loss is $8.90 per share. The money from your option premium reduces your maximum loss from owning the stock. The option premium income comes at a cost though, as it also limits your upside on the stock.
You can only profit on the stock up to the strike price of the options contracts you sold. Therefore, calculate your maximum profit as:
Maximum profit = (Strike price - stock entry price) + Option premium received
For example, if you buy a stock at $9, receive a $0.10 option premium from selling a $9.50 strike price call, then you maintain your stock position as long as the stock price stays below $9.50 at expiration. If the stock price moves to $10, you only profit up to $9.50, so your profit is $9.50 - $9.00 + $0.10 = $0.60.
If you sell an ITM call option, the underlying stock's price will need to fall below the call's strike price in order for you to maintain your shares. If this occurs, you will likely be facing a loss on your stock position, but you will still own your shares, and you will have received the premium to help offset the loss.
Final Word on the Covered Call Options Strategy
The main goal of the covered call is to collect income via option premiums by selling calls against a stock that you already own. Assuming the stock doesn't move above the strike price, you collect the premium and maintain your stock position (which can still profit up to the strike price).
Traders need to factor in commission when trading covered calls. If commissions will erase a significant portion of the premium received, then it isn't worthwhile to sell the option(s) and create a covered call.
Link can be accessed here > https://www.thebalance.com/determining-intrinsic-value-1031125