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:: Step 1: 25% of Underlying
Op 1:  $21.63 x 25% = $5.41
Op 2:  $33.06 x 25% = $8.27
Op 3:  $11.75 x 25% = $2.94
Op 4:  $26.69 x 25% = $6.67
Op 5:  $16.35 x 25% = $4.09
Op 6:  $5.10 x 25% = $1.28
 
:: Step 2: Margin (Pt 1)
Op 1:  $5.41 + $0.65 = $6.06
Op 2:  $8.27 + $1.15 = $9.42
Op 3:  $2.94 + $0.30 = $3.24
Op 4:  $6.67 + $0.85 = $7.52
Op 5:  $4.09 + $0.25 = $4.34
Op 6:  $1.28 + $0.45 = $1.73
 
:: Step 3: Amount OTM
Op 1:  $21.63 - $20.00 = $1.63
Op 2:  $33.06 - $32.50 = $0.56
Op 3:  $11.75 - $11.00 = $0.75
Op 4:  $26.69 - $25.00 = $1.69
Op 5:  $16.35 - $15.00 = $1.35
Op 6:  $5.10 - $5.00 = $0.10
 
:: Step 4: Margin
Op 1:  $6.06 - $1.63 = $4.43
Op 2:  $9.42 - $0.56 = $8.86
Op 3:  $3.24 - $0.75 = $2.49
Op 4:  $7.52 - $1.69 = $5.83
Op 5:  $4.34 - $1.35 = $2.99
Op 6:  $1.73 - $0.10 = $1.63
 
:: Step 5 Number of Contracts
Op 1:  $2,000 / $443 = 4
Op 2:  $2,000 / $886 = 2
Op 3:  $2,000 / $249 = 8
Op 4:  $2,000 / $583 = 3
Op 5:  $2,000 / $299 = 6
Op 6:  $2,000 / $163 = 12
 
:: Step 6: Assignment
Op 1:  Assigned? = No
Op 2:  Assigned? = No
Op 3:  Assigned? = No
Op 4:  Assigned? = No
Op 5:  Assigned? = No
Op 6:  Assigned? = No
 
:: Step 7: Premium
Op 1:  $0.65 x 100 = $65.00
Op 2:  $1.15 x 100 = $115.00
Op 3:  $0.30 x 100 = $30.00
Op 4:  $0.85 x 100 = $85.00
Op 5:  $0.25 x 100 = $25.00
Op 6:  $0.45 x 100 = $45.00
 
:: Step 8: Gross Profit/Loss
Op 1:  $65.00 x 4 = $260.00
Op 2:  $115.00 x 2 = $230.00
Op 3:  $30.00 x 8 = $240.00
Op 4:  $85.00 x 3 = $255.00
Op 5:  $25.00 x 6 = $150.00
Op 6:  $45.00 x 12 = $540.00
Total   $1,675.00
 
:: Step 9: Net Profit/Loss
Gross Profit: $1,675.00
Brokerage: $93.75
Subscription Fee: $105.00
Net Profit: $1,476.25
 
:: Step 10: ROI
Net Profit: $1,476.25
Bank: $20,000
ROI: 7.4%

Naked Puts
 

The information you will need to calculate your ROI from an advisor's naked put results will depend on how you calculate your margin. While there are a number of different ways of doing this, we use the following: 25% of the underlying market price + the premium - amount out-of-the-money. As such, you will need to know:

  1. The price of the underlying at initiation

  2. The price of the underlying at expiration

  3. The premium received

  4. The option's strike price

  5. The dates the trades were entered

As an example, let's assume that you had subscribed to a naked put writing service with a $20,000 bank and decided that you were going to risk 10% (or $2,000) per trade. For the month you're analysing, the advisor's results were:
 
Stock      Entry      Date     Entry      Price        Exit          Price        Sold          Option Premium
ODP 13-Apr $21.63 $20.25 May 20 P $0.65
CECO 22-Apr $33.06 $34.70 May 32.50 P $1.15
THC 28-Apr $11.75 $12.50 May 11 P $0.30
MW 28-Apr $26.69 $32.30 May 25 P $0.85
BMC 02-May $16.35 $17.79 May 15 P $0.25
DNDN 04-May $5.10 $5.58 May 5 P $0.45
 
:: Step 1: 25% of Underlying
The first step in calculating your ROI is to determine your margin, as this is the value against which your premium will be measured to give us your return. The first step is to calculate 25% of the price of the underlying stock at the time the trade was initiated.
 
:: Step 2: Margin (Pt 1)
This now allows us to calculate the first part of the margin, which is done by adding the amount from Step 1 to the premium.
 
:: Step 3: Amount OTM
The next step is to calculate the amount by which each sold put was out-of-the-money. This is done by subtracting the strike price of the put from the share price at initiation (as a put is in-the-money when its strike price is above the share price).
 
:: Step 4: Margin

Now we are in a position to work out the margin for each trade, which is done by subtracting the amount in Step 2 from the amount in Step 3.

Note that the amount shown is not the actual margin - that would be 100 times the shown amount as each option contract represents 100 shares of its underlying. You can either work with the "base rate" as we've done here, or with the "multiplied rate" as we did in the Covered Call section. Choose whichever form is easier to understand.
 
:: Step 5 Number of Contracts
Once we know the margin necessary to initiate each trade, we can determine how many contracts you would have been able to write. This is done by dividing your allocation per trade by the margin required per trade (that is, Step 4 x 100).
 
:: Step 6: Assignment
In order to work out your return for the month we need to first determine whether any of the options you wrote expired in the money and if, as a consequence, their underlying shares were assigned to you (compelling you to purchase them). This is necessary as it will effect your return. If you did have to purchase the shares you would then need to either hold them or sell them at a loss (as the price you paid - the strike price - would be higher than the current market price). Or, anticipating that this would be the case, you would have had to buy back your position at a loss, effectively giving back some or all of your premium. The easiest way to determine if any of the trades were assigned is to look at the share price at expiration - if it was below the strike price you would have been, while if it was above it you wouldn't have been.
 
:: Step 7: Premium
Knowing that none of the trades were assigned means that you would have kept the entire premium for each trade.
 
:: Step 8: Gross Profit/Loss
From the premium per trade we can calculate your gross profit/loss, which is found by multiplying the number of contracts you wrote per trade (Step 5) by the premium per trade (Step 7).
 
:: Step 9: Net Profit/Loss
From the gross profit we can easily calculate the net profit/loss by subtracting your costs, which would have been brokerage and your monthly subscription fee. The brokerage on an unassigned naked put is $14.95 (if less than 10 contracts) and $1.50 per contract if 10 or more. This means the brokerage is $14.95 x 5 ($74.75) plus $1.50 x 12 ($18.00) which is $93.75. As before, we'll set the subscription fee at $105/month.
 
:: Step 10: ROI
Finally, we can calculate the ROI, which is done by dividing the net profit by your starting bank. This is shown in in Step 10 and it is 7.4%.