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Hello,

I have searched, but am trying to figure out how to calculate the total return of a stock, after the purchase of options to reduce downside risk. I am wondering for both circumstances, either allowing the options to expire, or sell them closer to the expiration date. It may be simpler than I imagine, but I would like to receive confirmation.

Thanks in advance. Please let me know if I can elaborate at all.
 

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How about: [ current value of stock + dividends for the period - put premium + premium recovered from sale of put ] divided by [cost of stock ]

You could also annualize the result if that is required.
 

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Hello,

I have searched, but am trying to figure out how to calculate the total return of a stock, after the purchase of options to reduce downside risk. I am wondering for both circumstances, either allowing the options to expire, or sell them closer to the expiration date. It may be simpler than I imagine, but I would like to receive confirmation.

Thanks in advance. Please let me know if I can elaborate at all.
For a beginner of covered call writing I would suggest the following....and stick to it in the beginning

1) Buy at least 500 shares and sell 5 covered calls (not less )

2) Figure your NET RETURN ± 1%/month AFTER ALL COMMISSIONs

3) Dont touch nothing, let the option expire, do not buy it back or let the option be exercised if the stock is above the strike price, if your mathematics where right you make you planned profit...so no complaining and ready for the next run

To give you an idea of commissions....calculated PER SHARE

500 shares, 9,95$ = 2¢
5 options 16,25$ = 3¢
500 shares exercised = 43$ = 9¢

Total 14¢ Share

You dont need a calculator to see if your intended operation is profitable if exercised

Buy 500 @ 29,86

Sell 5 strike 30,00$ ...2 months 0,60

After 2 months exercised @ 30$....net 2% after 2 months = 12% anualized :love-struck:
 
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