Annualized Option Premium Yield Calculator
Turn an option premium into an annualized yield on capital for covered calls and cash-secured puts — compare a short-dated premium to a yearly return.
How it works
Period yield = premium ÷ capital × 100 · Annualized yield = period yield × (365 ÷ days)
Annualizing scales a short-dated option premium up to a comparable yearly rate, so a $2 premium collected over 30 days can be judged against a savings rate or dividend yield. It is a simple (non-compounded) annualization and assumes you can keep re-selling similar premiums — real results vary as volatility, assignment and price moves interfere. Treat it as an upper bound on the income, not a guaranteed return.
Worked example
Selling a 30-day covered call for $2 on a $100 stock is a 2% return for the month. Annualized: 2% × (365 ÷ 30) ≈ 24.3% — assuming you could repeat the trade about 12 times a year at the same terms.
Frequently asked questions
Does annualizing overstate the real return?
Often, yes. It assumes you can perpetually re-sell premiums at the same rate and ignores assignment, gap moves and periods when premiums shrink. It is best used to compare option trades on a like-for-like basis, not as a promised yield.
What should I use as the capital at risk?
For a covered call use the stock price you paid (the capital tied up in shares). For a cash-secured put use the strike price, since that is the cash you must set aside to buy the stock if assigned.
Why divide by 365 and not 252?
Because option premium decays over calendar time, including weekends. Using 365 calendar days annualizes on the same basis the premium was earned.
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Educational estimate using a simplified Black–Scholes / options model — no dividends, no early-exercise, no fees or slippage. Options are high-risk. Not investment advice.