In this Deal Reveal, I want to show you more about mcSquares. This startup has created a new movement in the office and education spaces — Whiteboarding.
mcSquares designs and manufactures a line of innovative and eco-friendly consumer goods focused on organization and collaboration.
They are killing it right now with impressive growth and software-level gross margins on their physical products.
Here’s the thing — The Boardroom and our members got the chance to invest in mcSquares before we found out that it will appear on Shark Tank. This means we got on board before the notorious Shark Tank bump.
After airing on this show, startups always see an insane increase in revenue.
You too can be a part of this investment opportunity. As soon as the next round of funding opens, members of my Angel Investing Insider service will be alerted.
mcSquares makes dry-erase collaborative products. These products extend and democratize meeting rooms and classrooms and help people engage with one another.
Right now one of the startup’s top product lines is an eco-friendly replacement for Post-it Notes. Stickies, as they’re called, are selling like hotcakes and have a gross margin of 90%.
Anthony Franco has already built and exited four separate companies before mcSquares.
Like they say, angel investing is like betting on horses. The horse (product) is essential, but you also need a good jockey (founder). Well, Anthony has already won the Kentucky Derby four times. He’s a safe bet to win it again.
His four previous ventures were all in tech. He’s a software nerd at heart.
Let’s break down Anthony’s entrepreneurial success:
The angels of The Boardroom decided to invest in mcSquares. Little did they know, just a short time later Anthony would be set to appear on the hit TV show, Shark Tank.
This is an incredibly rare circumstance. To get into a company before it appears on the biggest investment show ever is a real home run.
After appearing on the show, startups experience the famous “Shark Tank Effect”, boosting their revenues and notoriety exponentially.
Before the big relaunch, mcSquares products were manufactured in China — this just wasn’t working for the company.
As Anthony put it, “The manufacturer screwed up and was holding us hostage.”
His supply chain seized up and production was no longer in his control. He felt that he didn’t own his business, the manufacturer did. This was when Anthony knew he had to take manufacturing into his own hands.
So, he brought manufacturing to the U.S. before eventually bringing it in-house.
According to Anthony, in-house manufacturing gives mcSquares three big advantages:
Q: What Is your current profitability and your future growth projections?
A: I’m currently operating the company at a negative profit. We’re operating for growth, not to keep the cash. If I needed to, I could stop growing and be cash-flow positive today. In terms of future growth, it all comes down to our products and their Gross Margins.
The product that’s crushing it right now is our Stickies. The 6-pack of these has a 92% Gross Margin. That’s software margins, not physical product margins, all driven by the fact that we can manufacture them.
Our projections do not include any airtime. We are projecting to grow from just under a million last year to over three this year. That’s without the bump. The bump (from Shark Tank) changes the game significantly.
Then, we should go from three to eight million the next year, and from eight to fifteen in 2022. That’s what our current projections state.
Q: Can you tell us about barriers to entry for competitors and copiers of your products? You have used the word “proprietary” to describe some products, can you unpack that?
A: We have nine patents we have filed, four have been issued the other five are pending.
We have an exclusive on the material on the back of Stickies. That’s an Aerospace material that’s used by large Aerospace companies like Boeing, JPL, and Airbus.
The company that manufactures this material doesn’t want to touch it on the consumer space. So we were able to gain world-wide exclusivity on that super unique material.
Really though, the protection for a consumer brand like us is the brand. IP is great, it’s a good defensive measure, the trade-secreted material that we use called BubbleBond is also a barrier or unfair advantage for us, but where we see our biggest advantage is our nimbleness and the fact that we are building a brand around what we are calling “Whiteboarding”. We are creating a tribe.
That’s what you’re investing in. You’re investing in the mcSquares brand and the ability to scale and grow new product lines and innovate. IP matters, defensibility matters, but really what matters in the consumer space is brand and we’re doing a good job at that.
Q: Can you let us know about the University of Denver study on mxSquares products?
A: We ran a study with the University of Denver. We put our Tablet product in a middle school classroom and did A/B tests with and without the tablets.
The study showed a 340% lift in passing grades when you had an mcSquare classroom and a 40% lift in overall test scores.
Honestly, I didn’t believe it. I kind of called BS on our own study and said, “Run it again!” The results came back the same. Different classrooms, different teachers, different administrators, and it came out the same.
Q: What is the cost of moving the manufacturing in-house? How does this impact overhead costs and the production of each product?
A: So our costs dropped. Our COGs (cost of goods) dropped when we brought manufacturing in-house.
We had a huge expense in 2018 in equipment and gear — big machinery expenses.
We now have figured out how to scale our factory line to get to $50 million with just a few hundred thousand dollars in equipment.
We can scale right now with the equipment we have to $6 to $9 million in revenue. A single manufacturer in our factory can produce $1 million of retail products a year. So, if you want to get to $10 million, we need 10 people in production. It’s a very scalable business.
Options Profit Planner is focused on the use of technical analysis and Fractal Energy but there’s a handful of trading strategies that still need to be studied.
Typically if a trader is interested in going short and using the options markets, the first thing that comes to mind is to purchase a Put.
A purchase of a put option does two main things for a trader. It allows a trader to benefit from the decrease in the price of the asset and it limits or decreases the amount of loss they may incur.
This is much less risky than shorting the underlying asset and the trader can use the leverage of options to increase their gains as well.
Here is a payout diagram for both a short stock and put option.
The diagram on the left shows a traditional short sale of a stock. With this, there is an unlimited loss as the share price increases!
The diagram on the right shows the purchase of a put option. With this, there are limited losses as the share price increases!
Pro Tip: If you want to short a stock and you are aggressive with the direction, buying at the money puts gives you the most bang for your buck.
So what’s the benefit of using this strategy?
Now… there is something I must remind you of…
If you are wrong on the timing, your options may expire and you will still lose the trade.
And a solution is a strategy called a Credit Call Spread.
The Credit Call Spread (or Bear Call Spread) is a bearish to neutral options trading strategy.
It aims to capitalize on both downward price movement of the asset and theta decay.
Credit call spreads work extremely well in both directional and sideways markets as the options will expire worthless at the end of the trade, leaving the premium for the trader to collect on.
What does that mean exactly?
It means that you receive the cash upfront …
That’s right, you get paid to take that trade!
Another huge benefit of this trade is that it has a lower max loss compared to selling calls and even purchasing put options.
As a seller of options, we can still make money even in a sideways market!
This is such a great strategy since it allows me to trade a short call and have a max loss on the trade. This is a must to capitalize on premium decay and also market direction on the trade.
Now let’s take a closer look at the details of using this strategy and what to expect from it.
Remember , the goal is to profit from a neutral to bearish price action in the underlying stock while minimizing the impact of volatility and time decay.
What is this made up of?
This strategy consists of one short call with a lower strike and one long call with a higher strike.
The bear call spread is a net credit received, and you will get paid up front to take this trade. If the stock closes below your lower strike, you will be able to keep your entire credit received.
The potential profit is limited to the net premium received from placing the trade.
Max Profit = Net credit received
The maximum risk on this trade is limited, unlike naked calls, or short stock.
The maximum risk is calculated as the difference between strike price minus the net credit received.
Max Risk = strike higher – strike lower – net credit received
The maximum risk is realized if the stock price expires at or above the long call at expiration.
Like trading most trading strategies, there’s a breakeven that a trader needs to consider on this trade.
Dreakeven = strike price -the short call + net credit received
Now that you know these three basic calculations, let’s take a look at some of the factors that impact this strategy.
As a reminder…
The bear call spreads is a strategy that collects option premium and limits risk at the same time. They profit from both time decay and falling stock prices. A bear call spread is the strategy of choice when the forecast is for neutral to falling prices and there is a desire to limit risk.
A bear call spread benefits when the underlying price falls and is hurt when it rises.
This means that the position has a net negative delta for the trader.
Delta estimates how much an option price will change as the stock price changes, and the change in option price is generally less than dollar-for-dollar with the change in stock price.
Also, because a bear call spread consists of one short call and one long call, the net delta changes very little as the stock price changes and time to expiration is unchanged.
In the language of options, this is a “near-zero gamma.”
Gamma estimates how much the delta of a position changes as the stock price changes.
Volatility is a measure of how much a stock price fluctuates in percentage terms, and volatility is a factor in option prices.
As volatility rises, option prices tend to rise if other factors such as stock price and time to expiration remain constant.
Since a bear call spread consists of one short call and one long call, the price of a bear call spread changes very little when volatility changes and other factors remain constant.
In the language of options, this is a “near-zero vega.”
Vega estimates how much an option price changes as the level of volatility changes and other factors are unchanged.
The time value portion of an option’s total price decreases as expiration approaches. This is known as time erosion.
Since a bear call spread consists of one short call and one long call, the sensitivity to time erosion depends on the relationship of the stock price to the strike prices of the spread.
If the stock price is “close to” or below the strike price of the short call (lower strike price), then the price of the bear call spread decreases (and makes money) with passing of time.
This happens because the short call is closest to the money and erodes faster than the long call.
But… if the stock price is “close to” or above the strike price of the long call (higher strike price), then the price of the bear call spread increases (and loses money) with passing time.
This happens because the long call is now closer to the money and erodes faster than the short call.
If the stock price is half-way between the strike prices, then time erosion has little effect on the price of a bear call spread, because both the short call and the long call erode at approximately the same rate.
Option sellers take maximum advantage of the option time decay theory, commonly known as Theta Decay.
OTM options lose value quickly and become worthless at expiration. This allows traders to not have to worry about correctly predicting the market direction or timing the market perfectly to generate income.
We can take advantage and be the house with odds in our favor on every trade
Don’t forget that an option buyer needs to be right about direction and time!
There are many ways to make money in this market and selling options is one of my absolute favorite go-to strategies.
You’d probably think that brokers are out there to help people take control of their financial future…
While a majority of them are there to help and answer questions, as well as manage people’s money…
There are some greedy ones that slip through the cracks and will do what’s best for themselves.
Take this Tennessee-based securities broker for example.
He was in charge of managing people’s money…
Two of them were seniors…including a World War II veteran.
Instead of helping these seniors and their families, this broker — Frederick Stow — allegedly was in it for their own gain.
According to the SEC, this broker acted as the veteran’s registered representative for more than 30 years.
During that time, he may have gained their trust and placed himself in a position of trust.
The complaint alleges that the broker started to make unauthorized sales of securities from the veteran’s individual retirement account.
According to the SEC, the broker allegedly transferred the proceeds of the sales to his own bank account…
A whopping 74 times.
Allegedly, he crafted up wire transfer forms…
And one month after the veteran’s death in March 2019, the broker wired money from the senior’s brokerage account to his own, without authorization.
The grand total of his scheme: $933,500.
When it comes to brokers and financial advisors, I believe it’s important to conduct due diligence and be wary of them.
While most of them can be good, there are bad apples out there.
That’s one of the reasons why I’ve made it my goal to teach people how to trade.
Well, to be honest with you, there are so many trade ideas for me to take advantage of…
And it levels the playing field, in my opinion.
I mean take a look at this recent trade I saw hit my scanner…
165 PLNT Jul $60 Puts
They Paid $3.67 (Above the Ask)
For A Total of $61K In Premium
When the stock trading at $62.67.
By the end of the day on Friday, they were worth about $4.20 a pop…
Representing a modest gain after placing the trade just a few hours before.
If you don’t know, coronavirus cases are ticking up…
And some states may have to start rolling back their re-opening plans.
Do they know something we don’t?
Only time will tell.
If stay-at-home rules sweep the country again…
I believe companies like Planet Fitness can suffer.
The “smart money” leaves clues around…
By if you understand how the smart money moves…
You can generate countless trading ideas each week, in my opinion.
If this sounds unfamiliar to you, don’t worry…