Are You Being Rational?
Investing can be one of the most effective ways to make your money work for you and build wealth. But buying an investment should be based on reason. Reason is the capacity to apply logic and draw valid conclusions from information, aiming to seek reality based on some known goal. It involves rational thinking and understanding.
Fidelity wrote an article that was titled “3 potential benefits of investing for growth.” This article wisely notes that “…having too much in cash can be surprisingly risky over the long term. There is relatively little growth potential, you may lose purchasing power to inflation and run the risk of falling short of your goals.”
Another interesting observation from the same article says, “More than 1 in 10 retirement investors has an investment mix that Fidelity would consider too conservative for their time frame. A little extra return could potentially improve their chances of maintaining their lifestyle in retirement.”
Four Reasons I Buy an Investment
In the end, the most basic reason is INCOME. That reason then causes me to ask three questions. The questions are: 1) Will this asset appreciate in value at a rate greater than inflation, considering total returns (price growth plus dividends?; 2) Can I earn income with this investment without buying shares of the investment?; and 3) If I buy this investment, can I add to my income trading covered call options?
Sometimes there are no dividends from an investment. When I was reviewing Fidelity’s Trader+ software with my son last week, he told me about two investments he has been using to earn INCOME. The two investments are Sezzle Inc. and SELLAS Life Sciences Group, Inc. I added some sizzle for income by purchasing Sezzle shares.
Sezzle does not pay a dividend and has a P/E ratio of 34.67. The current Seeking Alpha QUANT rating is 4.7, which is a STRONG BUY. SEZL is a financial services company: Transaction & Payment Processing Services.
Stellas (SLS) is a healthcare biotechnology company. It has a current QUANT rating of 3.49 (HOLD) and no P/E because they have not realized any profits.
Reasons I Bought SEZL and SLS
I bought shares of both on Monday. Before you rush to buy, you need to understand that these are very different types of investment. Both are risky. SLS is far more risky than SEZL.
I paid $17,615.17 for 100 shares of SEZL. Then I sold a covered call option on the shares and received $845.32. Let’s do the math. I received an immediate synthetic dividend of 4.8% by receiving cash on the same day I bought the shares. As I type this, the Pre-Market price for SEZL shares is $173.38 which is down $4.25 (-2.39%).
SEZL: My option contract is CALL (SEZL) SEZZLE INC JUL 17 26 $180. This means the share price has to reach $180 by a week from Friday for the contract to be called. If that doesn’t happen, then I keep the shares and can do another covered call option trade. If it does rise to or above $180/share, I will receive $18,000 for the investment, which is about $385 more than what I paid to buy the shares. That would mean that I would have received a total of $1,230 in under a month of owning the SEZL shares.
SLS: My purchase price per share for SLS was $13.95. I sold a covered call option on the 100 shares and received $115.34. (CALL (SLS) SELLAS LIFE SCIENCES JUL 10 26 $14.5) Let’s do the math. I received an immediate synthetic dividend of 8.3% by receiving cash on the same day I bought the shares. As I type this, the Pre-Market price for SLS shares is $13.81 which is up $0.31 or +2.30%. If the shares are above $14.50 on Friday’s close, I will receive another $55.00 in profit, bringing my total income in less than one week to $170. If they aren’t called, it is time to do another contract.
The Cash Covered SLS PUT Option
I also have the potential to earn income on SLS even if I don’t own shares. For example, I sold a $11.50 put option for a profit of $37.34. The option contract expires on Friday. If the price per share stays about $11.50, I don’t have to buy the shares and I keep the profit. Otherwise, I may have to buy the shares and then start selling cash covered calls on those shares as well. (PUT (SLS) SELLAS LIFE SCIENCES JUL 10 26 $11.5)
About Sezzle
Sezzle Inc. operates as a technology-enabled payments company in the United States and Canada. The company offers Sezzle Platform that provides a payments solution for consumers that extends credit at the point-of-sale allowing consumers to purchase and receive the ordered merchandise at the time of sale while paying in installments over time; Pay-in-Four, which allows consumers to pay a fourth of the purchase price up front and then another fourth of the purchase price every two weeks thereafter over a total of six weeks; Pay-in-Full that allows consumers to pay for the full value of their order up-front through the Sezzle Platform without the extension of credit; Pay-in-five which allows eligible consumers to pay a fifth of the purchase price up front, and then another four installments every two weeks; Pay-in-Two, which allow consumer to pay half of the value of their order up-front and the second half in two weeks; and other alternative installment options. It also provides Sezzle Virtual Card that allows consumers to access the Sezzle Platform in the form of merchants in-store and online with merchants that are not directly integrated with Sezzle; Sezzle Anywhere, a paid subscription service that allows consumers to use their Sezzle Virtual Card at any merchant online or in-store; Sezzle On-Demand, a service that allows consumers who are not subscribed to Sezzle Anywhere to use the Sezzle Platform at any merchant online or in-store; Sezzle Premium, a paid subscription service that allows its consumers to access large, non-integrated premium merchants; Sezzle Balance, a stored-value product that allows consumers to maintain funds in Sezzle account for use toward eligible purchases or make payments on the Sezzle Platform; and Sezzle Up, an opt-in feature of the Sezzle Platform. In addition, the company offers Long-Term Lending through collaboration with third-party lenders. Sezzle Inc. was incorporated in 2016 and is headquartered in Minneapolis, Minnesota.
About SELLAS Life Sciences Group
SELLAS Life Sciences Group, Inc., a late-stage clinical biopharmaceutical company, focuses on the development of novel therapeutics for various cancer indications in the United States. The company’s lead product candidate is galinpepimut-S (GPS), a peptide immunotherapy directed against the Wilms tumor 1, antigen; and SLS009 (tambiciclib), a selective small molecule cyclin-dependent kinase 9, or CDK9, inhibitor. It has a strategic collaboration with Merck & Co., Inc. to evaluate GPS as it is administered in combination with PD1 blocker pembrolizumab in a Phase 1/2 clinical trial enrolling patients in up to five cancer indications, including hematologic malignancies and solid tumors; GenFleet Therapeutics (Shanghai), Inc. for the development and commercialization of GFH009; and Memorial Sloan Kettering Cancer Center for developing and commercializing MSK’s WT1 peptide vaccine technology. SELLAS Life Sciences Group, Inc. is headquartered in New York, New York.
Recommendation: Options For Investing Doers
Don’t buy SEZL or SLS if you don’t want to trade options contracts on these companies. It is better to avoid non-dividend investments unless you have more appetite for risk.
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