In the previous section on Returns, we looked at the steps necessary to
calculate the Return on Investment (ROI) for a particular stock or option trade. In doing
this, we also established how to work out the monthly ROI for an advisory
service.
For example, when we determined that the ROI for the Puts/Calls trades was
8.8%, that would also have been the ROI for that month for a service if
those were the only trades it did. This would be true regardless of the mix
of trades - that is, whether they were puts & calls, spreads or covered
calls. When you calculate their combined ROI, that is also the service's
monthly ROI.
The next step is to combine
the ROI from one month with the same data for several adjoining months. This
then allows you to start building a picture of how a service is performing,
and not just with regard to each month's individual ROI.
Because once you have calculated the ROI for several months, you're in
a position to use those results to really "drill down" inside the figures.
On the following pages, we give you the detailed steps we take
(once the ROI has been calculated) to further analyse a service's
results. If you haven't already done so, you can see the end result
of these calculations on the example we provide in the
Reports section.
