Cash-Secured Put Annualized Return
Calculates the simple-annualized rate of return on selling a cash-secured put, assuming the option expires worthless. Uses the strike price as the cash basis (the amount set aside to secure the obligation).
When to use: Use when sizing income from put-writing strategies — comparing the per-trade premium yield against the cash you must set aside, scaled to an annual rate so different expirations can be compared on equal footing.
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 one put expiring June 19, 2026 (51 days out) at a $100 strike for $2.50 of premium per share.
Given
Step-by-Step
Earning 2.50% on cash held aside for 51 days annualizes to about 17.9% — a useful benchmark for comparing put writes across different expirations.
Example 2: Weekly Put on a $50 Strike
On April 29, 2026 you sell a 7-day put (expiring May 6, 2026) at a $50 strike for $0.40 of premium.
Given
Step-by-Step
Short-dated puts often look attractive on an annualized basis because the 365/DTE multiplier is large — but the headline number ignores assignment risk and is rarely repeatable 52 weeks running.
Frequently Asked Questions
The strike is the cash you must keep available to honor assignment, so it is the true capital base for a cash-secured put. Some traders use Strike − Premium (net cash outlay) as the denominator, which produces a slightly higher figure; both conventions are common, but strike-based return is the more conservative and widely cited form.
Simple — Premium ÷ Strike × 365 ÷ DTE. It assumes you could repeat the trade end-to-end through the year at the same yield, which is a useful comparison metric but not a guaranteed forward return. The compounded form (1 + Premium/Strike)^(365/DTE) − 1 produces a higher number, especially for short-dated trades.
Assignment risk (if the put goes in the money you may have to buy the underlying at the strike), commissions, bid-ask slippage, margin treatment, and the opportunity cost of cash. Treat the figure as a per-trade yardstick, not a guaranteed annual return.
As the calendar-day difference between the expiration date and today, including weekends and holidays. Some traders prefer trading-day counts, but calendar days match the convention used in most broker platforms and option-pricing models.