Definition

The Option Yields endpoint calculates the yields for two common options strategies: Covered Call and Cash Secured Put.

Covered Call: This strategy involves selling a call option while being long on the underlying asset. The yield is calculated based on the difference between the proceeds from selling the call and the cost of acquiring the underlying asset.

Cash Secured Put: This strategy involves selling a put option while holding enough cash to cover the potential purchase of the underlying asset. The yield is based on the difference between the proceeds from selling the put and the cash balance maintained.

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Details

The Option Yields endpoint calculates yields for two options strategies:

Covered Call:

• Absolute Yield is calculated by dividing the proceeds from selling the call option by the initial position in the underlying asset.
• Annualized Yield is obtained by multiplying the Absolute Yield by the factor representing the number of minutes in a year (525,600) divided by the minutes left until the option expires.

Cash Secured Put:

• Absolute Yield is determined by dividing the proceeds from selling the put option by the initial cash position.
  Annualized Yield is calculated by multiplying the Absolute Yield by the factor representing the number of minutes in a year (525,600) divided by the minutes remaining until the option expires.

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Availability

/Options Yields

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Frequently Asked Questions

Q: How is the Absolute Yield for a Covered Call strategy calculated?

A: The Absolute Yield is calculated by dividing the proceeds from selling the call option by the initial position in the underlying asset.
Q: What is the purpose of calculating the Annualized Yield for a Covered Call?

A: The Annualized Yield provides an annualized rate of return based on the Absolute Yield, adjusted for the time remaining until the option’s expiration.
Q: How is the Absolute Yield for a Cash Secured Put strategy determined?

A: The Absolute Yield is determined by dividing the proceeds from selling the put option by the initial cash position.
Q: Why is the Annualized Yield important for a Cash Secured Put strategy?

A: The Annualized Yield shows the return on the cash-secured put option on an annual basis, accounting for the time remaining until expiration.
Q: What factors are needed to calculate Annualized Yields?

A: To calculate Annualized Yields, you need the Absolute Yield and the number of minutes left until the option expires.