Annualized Return calculation
Annualized Return At Open
This is calculated by taking the credit on a sold option over the remaining days to expiry and then annualizing that number.
$100 credit from selling option $900 risk ($1000 risk - credit) Return = 100/900 = 11% 30 days to expiry % 365 days in a year = 12.16x 11% x 12.16 = 133%
This is not compounded. This is averaged across all of your open trades.
Annualized return at Close
This uses the same calculation except it uses the realised profit & loss on closed trades only. It measures how long the trade was opened.
If your call you sold for 30 days is closed after 10 days for 50% profit (using the example above) $50 final credit from selling option (50% profit) $900 risk ($1000 risk - credit) Return = 100/900 = 5.5% Closed after 10 days instead of 30 % 365 days in a year = 36.5x 5.5% x 36.5 = 200.75%
Updated on: 26/03/2023