Oscar Health: Volatile Stock Also Offers High Option Premiums

Core Insights - Oscar Health (OSCR) is characterized by high volatility, leading to elevated option premiums, making cash-secured puts an attractive strategy for traders looking to buy the stock at a discount [1][6]. Cash-Secured Put Strategy - A cash-secured put involves writing a put option while setting aside enough cash to purchase the stock if assigned [1]. - For example, selling an October 17 put with a strike price of $17 could generate approximately $110 in premium, obligating the seller to buy 100 shares at that price if assigned [3]. Financial Metrics and Returns - The break-even price for this trade is calculated at $15.90, which is 10.5% below the stock's recent close [4]. - If the stock remains above $17 at expiration, the put expires worthless, yielding a 6.92% return on capital at risk, equating to around 84% on an annualized basis [4]. Risk Considerations - The maximum loss occurs if Oscar Health stock falls to zero, resulting in a loss of $1,590, although investors typically would exit before reaching this point [5]. - The risk profile of cash-secured puts is similar to outright stock ownership, with potential losses offset by the premium received [4]. Earnings and Ratings - Oscar Health has already reported its second-quarter earnings, eliminating earnings risk for this trade [6]. - Investor's Business Daily assigns Oscar Health a Composite Rating of 50 out of 99, with an Earnings Per Share Rating of 27 and a Relative Strength Rating of 73, ranking 43rd in its group [7].