Last Week's Income Report: November 15th, 2021
Although the major indices are technically stretched, the rally isn’t slowing. Even news of higher inflation isn’t enough to cool things off.
Last week, we saw two important inflation indexes show record increases.
The Producer Price Index (PPI), which gauges inflation at the wholesale level, jumped 8.6% in October from a year ago. This tied September for the highest annual pace on record since the Labor Department began tracking producer prices more than 10 years ago.
The Consumer Price Index (CPI) registered the biggest inflation surge in more than 30 years in October, jumping 6.2% from a year ago.
You’d think data like this might stop the bull market rally in its tracks. And stocks did fall, snapping a winning streak for the S&P 500. But the index bounced right back, closing the week off just 0.3%
In short, the market isn’t letting any signs of negativity stand in its way, and neither are we.
At Options Income Blueprint, we closed two more winners last week, generating $135 in cash.
That brings our total income for the year to $6,916.
We’ve traded Corning (GLW) a total of four times this year, booking $250 in income. We’ve been able to capitalize on the fact that Wall Street doesn‘t completely understand this diversified company, which makes glass, ceramics and other specialty materials, including fiber optic cables.
Today, though, I want to focus on Squarespace (SQSP), which is a new addition to the Options Income Blueprint portfolio.
Squarespace is an Internet hosting service company that serves small- and medium-sized businesses in about 200 countries and territories.
Just before I recommended a trade on the stock, the company announced another outstanding quarter of growth, generating $201 million in revenue, up 24% year over year. Commerce revenue was up 55% from a year ago to $59.8 million.
Unique subscriptions hit 4 million in the third quarter, a 13.5% increase from a year ago. Meanwhile, the average revenue per unique subscription grew 5.7% to $198.
For the fourth quarter, the company expects to see revenue of $203 million to $206 million, or year-over-year growth of 18% to 20%. Management also upped its revenue guidance for the full fiscal year to $780 million to $783 million, from a prior range of $772 million to $780 million. The new forecast represents growth of more than 25%.
“Squarespace had another outstanding quarter as we continued to achieve strong revenue growth and introduce new solutions that give our millions of customers around the world the competitive advantages they need to succeed,” said Squarespace Anthony Casalena, founder and CEO.
The company reported its results Monday, Nov. 8, after the close. Shares gapped up the next morning before turning sharply lower. By late morning, the stock was down nearly 7%, trading at $43.28.
Seeing that the quarterly numbers were strong, I recommended a trade to capitalize on the post-earnings volatility.
Specifically, I told members to sell the SQSP Nov Monthly (11/19) 40 Put. We picked up $0.60 in cash, or $60 a contract, for selling this put option.
If the option expired worthless at the close on Nov. 19, we stood to make 1.5% over the $4,000 in capital required to secure the put. And since it was an 11-day trade, our potential annualized rate of return was 50%.
Just three days into the trade, though, SQSP had bounced back and was trading more that 11% above the strike price of the put we sold. The premium on that put had dropped to $0.25.
Now, we do not have a long history trading this stock. When that is the case, I tend to be a bit more conservative with closeouts, sometimes prompting members to take profits faster. As we become more familiar with how a stock trades, we may let it ride a bit longer.
With SQSP, though, we were sitting on an excellent short-term profit. So, I recommended members buy the put back for $0.25, booking a profit of $0.35, or $35 per contract.
Since we gave back some cash, our rate of return fell from a projected 1.5% to a realized 0.9%. But since we were only in the trade for three days, our annualized rate of return jumped from a potential 50% to 106%.
If I had to guess, I’d say we’ll continue to see outsized returns from Squarespace. In fact, I just may have another recommendation on the stock soon.