Cash-Secured Put Return on Net Cash
Annualized rate of return on a cash-secured put using the net cash outlay (Strike − Premium) as the denominator instead of the full strike. Reflects the actual cash tied up after the premium is received up front.
When to use: Use when you want the true return on cash actually deployed. Some brokers reduce the cash hold by the premium received, in which case the net-cash convention matches reality more closely than the strike-based form.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| IRR | Annualized Return | Simple-annualized return assuming the option expires worthless | % |
| Today | Today's Date | Date the option is sold (trade date) | date |
| Expiration | Expiration Date | Date the option contract expires | date |
| Premium | Premium per Share | Cash credit received per share for selling the option | $ |
| Strike | Strike Price | Exercise price of the option contract | $ |
Real-Life Examples
Example 1: 51-Day Put on a $100 Strike
On April 29, 2026 you sell a 51-day put at a $100 strike for $2.50 of premium. The premium reduces cash held aside to $97.50 per share.
Given
Step-by-Step
On net-cash basis the same trade yields 18.35% versus 17.89% on strike basis — about 46 bps higher because the premium has shrunk the capital denominator.
Frequently Asked Questions
Because it answers "what return am I earning on the cash actually tied up?" — a more direct measure of opportunity cost. Strike-based return treats the entire strike as committed even though the premium is yours to keep on day one.
Convention and conservatism. Most options screeners default to strike-based return because it is simpler to compute, easier to compare across strikes, and slightly understates yield (which traders prefer to overstating).
No — both formulas describe the same trade. They differ only in how they label the capital base. Assignment risk, break-even, and total dollar P&L are identical regardless of which denominator you choose.