Annualized Return Calculator
A tool we use with every weekly options trade is our Stock Options Contract Annualized Return Calculator. When we do our weekly options trades as a passive income strategy for accredited investors this is one of the most useful and important tools we use to help us consistently make profitable decisions. We use this tool to help us determine the annualized return of a short term options trade.
Here’s how to use the tool
- Only enter information into the yellow cells.
- Put Option Contracts: Enter today’s date and the expiration date of the trade. Then enter the strike price of the put option contract and the put option premium for selling the put option contract.
- Call Option Contracts: Enter today’s date and the expiration date of the trade. Enter your cost basis per share of the company. Enter the call option premium for entering into the call option contract.
Put Option Annualized Return Calculator
| Today's Date | 01/03/2026 |
| Contract Expiration Date | 01/19/2026 |
| Days Until Expiration | 16 |
| # of Periods in a Year | 22.81 |
| Strike Price | 47.50 |
| Put Option Premium | 0.65 |
| Multiplier | 0.0137 |
| Annualized Return | 31.2% |
Call Option Annualized Return Calculator
| Today's Date | 07/25/2024 |
| Contract Expiration Date | 08/16/2024 |
| Days Until Expiration | 22 |
| # of Periods in a Year | 16.59 |
| Cost Basis per Share | 25 |
| Call Option Premium | 1.50 |
| Multiplier | 0.06 |
| Annualized Return | 99.5% |
If we do a trade that is one week long, we could theoretically do that trade fifty-two times in a year. We determine that by starting with one year (365 days) and dividing that by the time period (one week). We know that one year is 52 weeks, so a one week trade could be done 52 times in a year. A trade that is active for nine days could be done 40.5 times in a year (365÷9). That number is our time multiplier.
We also use a multiplier for the amount of capital we have at risk divided by the premium we receive for entering into the trade. Let’s say we sell a put at the $45 strike and we generate $0.30 in premium. We take the $0.30 premium and divide that into the $45 strike, and that gives us 0.0667. We take that 0.0667 and multiply it by our time multiplier, and that will annualize the return for the trade.
Completing this step helps us compare different options trades. So let’s say we have a one week trade at the $45 strike with a bid of $0.30 in premium, and a two week trade on a different company at the $55 strike with a bid of $0.60. Which one is giving a higher return? Let’s use our Stock Options Contract Annualized Return Calculator to find out.
Trade 1: We take the $0.30 in premium and divide that into the $45 strike. That gives us 0.0067. It’s a one week trade, and we know there are 52 weeks in a year, so we multiply that 0.0067 by 52. That gives us 0.3467. That’s an annual return of 34.7%.
Trade 2: We take the $0.60 premium and divide that into the $55 strike. That gives us 0.0109. It’s a two week trade. There are 52 weeks in a year, and 52 divided by 2 is 26, so we multiply that 0.0109 by 26. That gives us 0.284, or an annual return of 28.4%.
So by using the Option Contract Annualized Return Calculator we quickly see the difference in return on the two trades. Then we ask ourselves if we prefer to get a 34.7% return for one week, or if we’re happy generating a return of 28.4% over two weeks.