Covered Call & Cash-Secured Put Annualized Return Calculator
Turn an option premium into a return you can compare. Enter the stock price, strike, premium and days to expiration and see the return for the period, the annualized return, your breakeven price and how far the stock can fall before you lose money. Free, no account.
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How the calculator works
Selling an option pays you a premium up front, so the return is the premium divided by the money the trade ties up. For a cash-secured put that is the cash you set aside, the strike × 100. For a covered call it is the value of the 100 shares per contract, measured at today's stock price. Dividing by days to expiration and scaling to 365 days puts trades with different lengths on the same footing.
The breakeven is the price where the position stops making money: the strike minus the premium for a put, the stock price minus the premium for a covered call. The result leaves out commissions, taxes, dividends and the chance that an option is assigned early. The annualized figures are comparisons, not forecasts.
Worked example: a cash-secured put
A stock trades at $50. You sell the 30-day $48 put for $1.20. You set aside $4,800 and collect $120. The return for the 30 days is $1.20 ÷ $48 = 2.5%. Scaled to a year, 2.5% × (365 ÷ 30) is about 30.4%. Your breakeven is $48 − $1.20 = $46.80, which is 6.4% below the stock price. If the stock stays above $48 you keep the $120 and the cash is free again. If it falls below $48 you buy 100 shares at $48, a cost of $46.80 each after the premium.
Frequently asked questions
How do you calculate the annualized return on a covered call?
Divide the premium by the stock price to get the return for the period, then scale it to a year: (premium ÷ stock price) × (365 ÷ days to expiration). A $1.00 premium on a $50 stock with 30 days left is 2% for the month, which annualizes to about 24%. If the shares are called away at a higher strike, the gain from the stock rising to the strike adds to the return.
How do you calculate the annualized return on a cash-secured put?
The cash set aside is the strike price × 100. The return for the period is the premium divided by the strike, and the annualized figure is that × (365 ÷ days). A $1.20 premium on a $48 strike with 30 days left is 2.5%, which annualizes to about 30%. If you are assigned, you buy the stock at the strike, and your cost is the strike minus the premium.
Is a high annualized return realistic?
Not as a promise. Annualizing assumes you can repeat the same trade at the same premium all year, and that rarely happens. A high premium usually means the market sees more risk, such as a big expected move or an earnings report, so the stock may fall or be called away. Treat the annualized number as a way to compare trades, not as what you will earn.
What is the difference between simple and compounded annualized return?
Simple annualizing multiplies the period return by how many periods fit in a year. Compounded annualizing assumes each period's profit is reinvested at the same return, so it comes out higher. Both assume the same trade can be repeated, which is why the simple figure is the more cautious one.
Learn the idea behind it
- Lesson 4.0: Cash-secured puts
- Lesson 4.1: Covered calls
- Lesson 3.1: Assignment, exercise and expiration
Want to try it on a real option chain? Signal Desk has option chains (about 15 minutes delayed) and a paper-trading account, so you can practice with simulated money.
Try it with your own numbers
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This calculator is for education. It does simple arithmetic on the numbers you type, shows nothing about whether a trade is a good idea, and leaves out commissions, taxes, dividends and early assignment. Options involve risk and you can lose the money you put in. It is not financial advice.