To calculate the annualized return on a cash secured put, divide the premium by the cash committed (strike × 100), then multiply by (365 ÷ days to expiration). For a $3.00 premium on a $100 strike put held for 35 days: ($300 ÷ $10,000) × (365 ÷ 35) = 31.3% annualized. This basic formula gets you 90% of the way there, but several adjustments make the calculation more accurate.

The Basic Formula

Annualized Return = (Premium ÷ Capital) × (365 ÷ DTE) × 100

Where:

  • Premium = total premium collected (per share × 100)
  • Capital = strike price × 100
  • DTE = days to expiration (or days actually held if closed early)

    • Quick Examples

    | Stock | Strike | Premium | Capital | DTE | Per-Trade % | Annualized | AAPL$185$2.50 ($250)$18,500351.35%14.1% AMD$155$3.20 ($320)$15,500322.06%23.5% PLTR$25$0.78 ($78)$2,500303.12%38.0% | SPY | $520 | $4.20 ($420) | $52,000 | 35 | 0.81% | 8.4% |

    Adjustments Most People Miss

    1. Use Actual Days Held, Not DTE

    If you sell a 45 DTE put but close it at 50% profit after 18 days, your annualized return is based on 18 days, not 45.

    Without adjustment: $320 ÷ $15,500 × (365 ÷ 45) = 16.7% With early close at 50% ($160 profit in 18 days): $160 ÷ $15,500 × (365 ÷ 18) = 20.9%

    Closing early often produces higher annualized returns because capital is freed faster, even though total dollars collected per trade is lower.

    2. Account for Commissions

    Most brokers charge $0.50-$0.65 per contract. For a round trip (sell to open, buy to close): about $1.00-$1.30 total.

    On a $78 premium (PLTR put), that $1.30 commission reduces your return by 1.7%. On a $420 premium (SPY put), the commission impact is negligible at 0.3%.

    3. Subtract Losses from Assignment

    True annualized return should include losing trades. If you sell 12 monthly puts and win 10 but lose money on 2 assignments:

    Annual premium collected: 10 × $250 = $2,500 Assignment losses: 2 × -$400 = -$800 Net annual income: $1,700 Annualized return: $1,700 ÷ $18,500 = 9.2%

    That's very different from the theoretical 14% you'd calculate looking at a single winning trade.

    4. The Compounding Question

    Simple annualization (multiplying by 365/DTE) assumes no compounding. If you reinvest premiums, compound annualization is more accurate:

    Simple annualized: (1 + 0.0135) × (365/35) - 1 = 14.1% Compound annualized: (1 + 0.0135)^(365/35) - 1 = 15.0%

    The difference is small for low per-trade returns but grows as monthly yields increase.

    Building a Return Tracker

    Track every trade: date, stock, strike, premium, capital, days held, result. After 20+ trades, calculate your win rate, average win, average loss, and aggregate annualized return (total net profit ÷ average capital deployed × 365 ÷ average days held). These real numbers are worth more than any theoretical calculator.

    Comparing Returns Across Strategies

    Annualized return lets you compare apples to apples:

  • Selling AAPL puts at 14% annualized
  • Selling AMD puts at 23% annualized
  • A savings account at 4.5% annualized
  • S&P 500 historical average at ~10% annualized

    • AMD's higher annualized return comes with more assignment risk. Whether that tradeoff is worth it depends on your risk tolerance. The annualized number quantifies the premium you're earning for accepting that additional risk.

    OptionsPilot automatically calculates and displays the annualized return for every strike, including adjustments for bid-ask spread and estimated assignment probability, giving you a more realistic number than raw premium ÷ capital.