Calculating Annual Return

Discussion in 'Options' started by Arnie Guitar, Jul 27, 2006.

  1. I wrote some options today, and while calculating the annualized return, I got to wondering how others do it. I mean, do you split hairs, or is close good enough?

    For example I wrote some August positions today.
    so there are 25 days left until I have access to the money I had to put up to write them.
    So is it;
    option premium divided by margin requirement
    divided by number of days
    times 365?
    Or do many of you go, "Well, it's about three and a half weeks 'til expiration, so it's return divided by 3 and 1/2 times 52."?

    I realize the difference is very small, but I was just curious how others do it.


    Failure is not falling down,
    Failure is not getting back up.
  2. MTE


    That would be simple return, if you want compounded return then you divide the premium by margin, add 1, raise to the power of 365/25 and then take away 1.