# How to calculate ROI on a net credit option transaction?

If I have an option that has a net credit and results in a positive expected value (based on my own estimates of volatility), how do I calculate an ROI in order to compare with a net debit credit options?

• Option 1: Net Credit +5 EV +1
• Option 2: Net Debit -1 EV +10
• Option 3: Net Credit +5 EV -1

Is there another metric that is better equipped to make the comparison between these? Is there information that is missing that is needed to make this comparison?

• How do you compute the "expected value" of your option? Is it not the price you should be considering? Also how do you define net credit? – SRKX Nov 20 '16 at 15:43

To calculate ROI of an option(s) sold for a credit you divide the credit received by margin you must maintain to carry that position.Then do not forget to annualize that number.

• An example would be great here because this is difficult to understand. – SRKX Nov 20 '16 at 15:40
• For example: stock XYZ at $$95 and you sell 100/110 credit call spread for$$1 with 1 mon to expiration. I am using Reg-T margin , which is for spreads is just the difference between strike prices. Hence your margin is $$10. So your return is$$1/10 = 10% a month. Annualized to a 120% a year. – baerrus Jan 30 '17 at 19:13