Updated September 2026
Premium collected on a single option trade tells you very little on its own — $150 in premium is a great return on a $3,000 cash-secured put and a mediocre one on a $30,000 covered call position. Comparing trades fairly means expressing return as a percentage, and comparing trades of different lengths fairly means annualizing that percentage. Here's exactly how that works.
Static return is simply premium ÷ basis, where basis is the cash or share value at risk: strike × 100 × contracts for both puts and covered calls. Sell a $50 put (1 contract) for $120 in premium and your static return is 120 ÷ 5,000 = 2.4% — for however long that position runs, whether it's one week or six months.
A 2.4% return over one week and a 2.4% return over six months are wildly different outcomes — the first is an extremely strong pace, the second is barely above a savings account. Comparing trades on static return alone systematically favors longer-dated positions that happen to have collected more absolute premium, even when their pace of return is actually worse. Annualizing corrects for that by expressing every trade on the same yearly basis, regardless of how long it actually ran.
The exact calculation used here: (premium ÷ basis) ÷ days held × 365 × 100, where days held is the real calendar span between your entry date and the expiration date — not an assumed standard period. This only runs when you supply an entry date; without one, there's no reliable holding period to annualize against, so the field is left blank rather than guessing.
Notice the one-week put has by far the smallest static return in dollar terms but the highest annualized figure — that's the point of annualizing: it isolates pace of return from duration, which raw premium or static return alone can't do.
Traders running weekly or bi-weekly cash-secured puts as a repeated income strategy are, in effect, compounding a short-duration return many times over the course of a year. Annualized yield is what makes those short cycles comparable to a single longer-dated covered call, or to a totally different asset's stated annual return — without it, a string of small weekly premiums looks unimpressive next to one large six-month number, even when the weekly strategy's actual pace is far stronger.
It's a rate of return on the capital tied up, not a promise that the same rate repeats — assignment, a rolled position, or a wider strike the next cycle can all change the real pace going forward. It also doesn't account for opportunity cost (what that cash or those shares could have earned elsewhere) or for the risk embedded in the trade itself. Treat it as a standardized way to compare trades you've already made, not a forecast.
Why is my annualized yield blank on some positions? No entry date was supplied for that position — add one and the figure appears immediately, computed from your actual holding period.
Does annualized yield update as the position ages? The holding period used is entry date to expiration date, which doesn't change day to day — the annualized figure is fixed once both dates are set, reflecting the trade's designed length rather than time elapsed so far.