nomadic_m
09-13

does my $CONL 20260116 24.0 PUT$ (sold on 4 Apr 2025) provides better return than term deposit of 5% per annum?


To calculate the rate of return (ROR) and annualized rate of return for my put option, i'll need to consider the premium received and the potential profit or loss.

*Given Values:*

- *Put Premium Received*: $420

- *Strike Price*: $24

- *Expiration Date*: January 16, 2026

*Rate of Return (ROR) Calculation:*

The ROR formula is:

ROR = (Profit / Investment) x 100%

Since i sold the put option, my profit is the premium received ($420). The investment is the margin required, which is the strike price multiplied by 100 minus the premium received.

*Margin Required*: ($24 x 100 shares) - $420 = $2,400 - $420 = $1,980 

ROR = ($420 / $1,980) x 100% ≈ 21.21%


*Annualized Rate of Return (AROR) Calculation:*

AROR = ROR / (Time to Expiration in years)

From April 4, 2025, to January 16, 2026, there are approximately 287 days.

Time to expiration = 287 / 365 ≈ 0.7863 years

ROR = 21.21% (calculated earlier)

AROR = 21.21% / 0.7863 ≈ 26.98% per annum


Let's compare the returns:

*Term Deposit:* 5% per annum (fixed return)

*Put Option:* 26.98% per annum (potential return if the option expires worthless)

The put option appears to offer a higher potential return (26.98% per annum) compared to the term deposit (5% per annum).


However, consider the following:

- *Risk*: Selling put options involves risk, as i may be obligated to buy the underlying asset at the strike price if it drops below that level. Term deposits typically have much lower risk.

- *Capital Utilization*: With a term deposit, my capital is locked in for a fixed period. With the put option, i'm using margin, which can be more capital-efficient.

Ultimately, the better option depends on risk tolerance, investment goals, and market expectations.

Modified in.09-14
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