Oscar Health (OSCR), characterized by its significant stock price fluctuations, presents an intriguing opportunity for options traders. The strategy of employing cash-secured put options allows investors to capitalize on this inherent volatility. This approach aims either to gain from the premiums when the option expires unexercised or to acquire the stock below its current market value. The core idea involves selling a put option, usually at or out of the money, while simultaneously earmarking sufficient capital to purchase the underlying shares if assigned.

Detailing a Cash-Secured Put Strategy for Oscar Health

For those considering an investment in Oscar Health, a cash-secured put option offers a calculated entry point. Imagine an investor willing to purchase 100 shares of Oscar Health at a price of 17 per share before October 17. By selling a put option with a strike price of 17 expiring on October 17, the investor could collect approximately $110 in premium. This transaction obligates the seller to buy 100 shares at the 17 strike price if the put buyer chooses to exercise the option. The break-even point for this trade, calculated by subtracting the received premium from the strike price, would be 15.90, representing a 10.5% reduction from the stock's closing price on the preceding Wednesday. If Oscar Health's stock price remains above 17 at expiration, the put option would expire worthless, yielding a 6.92% return on the capital at risk, which translates to an impressive annualized return of about 84%. The primary risk associated with this strategy mirrors that of direct stock ownership; a sharp decline in the stock price would result in losses, though partially mitigated by the premium received. The maximum potential loss would occur if the stock price fell to zero, amounting to $1,590, but most astute investors would likely exit the position long before such an extreme scenario. A notable advantage of this particular trade is the absence of earnings risk, as Oscar Health had already reported its second-quarter earnings prior to the proposed option's initiation. Furthermore, cash-secured puts serve as an excellent vehicle for generating income from stocks an investor is keen to own, potentially allowing for the subsequent sale of covered calls to create additional revenue streams.

This financial reporting underscores that options trading, while potentially lucrative, inherently carries risks, including the possibility of losing the entire investment. Therefore, it is imperative for all investors to conduct thorough due diligence and seek advice from a financial professional before making any investment decisions. This article serves an educational purpose exclusively and should not be misconstrued as a recommendation for trading.