If you sold a cash secured put, how do you calculate its rate of return and its annualized rate of return?
Thanks -
Barry
Hello Barry,
This is one of those things that different people choose to do differently.
Here is the only method that makes sense to me:
1) Determine how much cash must be set aside to buy shares (strike price x 100), if you are assigned an exercise notice
2) Subtract option premium
3)_That difference is the __amount invested__
4) Divide **profit** by amount invested to get __% return on investment__.
5) Multiply that result by 365 and divide by the number of days required to earn the profit and that's the __annualized return
__6) Don't forget to include transaction costs in calculations
__
__I don't know what you mean by 'rate of return' because that *is* the annualized return.
Mark

--
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options
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