:: Step 1: Cost Per Straddle

St 1: $1.80 + $0.45	=	$2.25
St 2: $1.20 + $0.55	=	$1.75
St 3: $0.95 + $0.10	=	$1.05
St 4: $0.35 + $1.95	=	$2.30
St 5: $0.60 + $1.20	=	$1.80
St 6: $1.60 + $0.45	=	$2.05

:: Step 2 Number of Straddles

St 1: $500 / ($2.25 x 100)	=	2
St 2: $500 / ($1.75 x 100)	=	2
St 3: $500 / ($1.05 x 100)	=	4
St 4: $500 / ($2.30 x 100)	=	2
St 5: $500 / ($1.80 x 100)	=	2
St 6: $500 / ($2.05 x 100)	=	2

:: Step 3: Outlay Per Straddle

St 1: $225.00 x 2	=	$450.00
St 2: $175.00 x 2	=	$350.00
St 3: $105.00 x 4	=	$420.00
St 4: $230.00 x 2	=	$460.00
St 5: $180.00 x 2	=	$360.00
St 6: $205.00 x 2	=	$410.00

:: Step 4: Exit Price

St 1: $2.25 + $0.10	=	$2.35
St 2: $0.90 + $0.10	=	$1.00
St 3: $3.50 + $0.05	=	$3.55
St 4: $0.20 +$0.35	=	$0.55
St 5: $0.50 + $0.20	=	$0.70
St 6: $0.20 + $0.70	=	$0.90

:: Step 5: % Profit/Loss

St 1: (2.35 - 2.25) / 2.25	=	4.4%
St 2: (1.00 - 1.75) / 1.75	=	42.9%
St 3: (3.55 - 1.05) / 1.05	=	238%
St 4: (0.55 - 2.30) / 2.30	=	76.1%
St 5: (0.70 - 1.80) / 1.80	=	61.1%
St 6: (0.90 - 2.05) / 2.05	=	56.1%

:: Step 6: Gross Profit/Loss

St 1: $450 x 4.4%	=	$19.80
St 2: $350 x 42.9%	=	$150.15
St 3: $420 x 238%	=	$1,000.02
St 4: $460 x 76.1%	=	$350.06
St 5: $360 x 61.1%	=	$219.96
St 6: $410 x 56.1%	=	$230.01
Total		$69.64

:: Step 7: Net Profit/Loss

Gross Profit:	$69.64
Brokerage:	$358.80
Subscription Fee:	$105.00
Net Loss:	$394.16

:: Step 8: ROI

Net Profit:	$394.16
Bank:	$5,000
ROI:	7.9%

Straddles & Strangles

The process for calculating your ROI for both a straddle and a strangle is essentially the same (and is very similar to that used for put/call trades). This is because the only real difference between the two strategies, from a trading profit/loss perspective, is that straddles are usually more expensive (and therefore more risky) than strangles because they are initiated using at-the-money options, as opposed to strangles which use options that are near-the-money. (This is distinct from their theoretical P/L graphs, where the difference between the two trades is readily apparent.)

While straddles and strangles can be both long and short, by far the most common version used by the various advisory services is the former. And of the two (straddles and strangles) the former is again the most common. Consequently, the profit/loss example below is for a long straddle.

Let us assume that you have subscribed to an advisor who recommends a number of straddles for a particular month, that you have $10,000 to trade with and that you are willing to risk 5% (or $500) per trade. The recommendations for the month were:

Stock	Entry Date	Entry Call	Entry Put	Option	Exit Call	Exit Put
AA	May-16	$1.80	$0.45	Jun 25 C / P	$2.25	$0.10
ABT	May-16	$1.20	$0.55	Jun 47.5 C / P	$0.90	$0.10
CRM	May-05	$0.95	$0.10	Jun 15 C / P	$3.50	$0.05
CYBX	May-09	$0.35	$1.95	Jun 40 C / P	$0.20	$0.35
DELL	Jun-01	$0.60	$1.20	Jun 40 C / P	$0.50	$0.20
IBM	May-26	$1.60	$0.45	Jun 75 C / P	$0.20	$0.70

:: Step 1: Cost Per Straddle

The first step in calculating your ROI from these trades is to work out the cost to enter each straddle (or strangle). This is done by adding the cost of the call to the cost of the put.

:: Step 2 Number of Straddles

Once we have established the cost of each straddle, we can work out how many of them you would have entered. This is done by dividing your allocation per trade ($500) by the cost of each straddle (Step 1) after it has been multiplied by 100.

:: Step 3: Outlay Per Straddle

Now that we know the number of straddles you would have purchased we can work out how much you would have outlaid for each by multiplying the cost per straddle (Step 1 x 100) by the number of straddles (Step 2).

:: Step 4: Exit Price

The outlay per straddle gives us the amount you would have had invested in the market. With that known, we can now look at what return you would have achieved on that investment. The first step is to calculate the price you would have received for the straddle when you exited the trade. This is done by adding the exit price of the call to the exit price of the put.

:: Step 5: % Profit/Loss

Knowing the exit price for each straddle allows us to calculate the percentage return for each trade by subtracting the cost per straddle (Step 1) from the exit price (Step 4) and dividing that amount by the cost per straddle.

:: Step 6: Gross Profit/Loss

Now we can work out your combined gross profit/loss for these trades, which is done by multiplying the outlay per straddle (Step 3) by the percentage profit/loss (Step 5).

:: Step 7: Net Profit/Loss

Knowing the gross profit/loss we can now calculate your net profit/loss, which is done by subtracting your brokerage and subscription costs. Your brokerage would be $14.95 per leg of each straddle on both entry and exit. That works out at $59.80 per straddle, or $358.80 in total, while your subscription we will set at $105/month.

:: Step 8: ROI

This brings us to you ROI for the month from these trades, which is calculated by dividing your net profit by your starting bank of $5,000. It gives you a loss for the month of -7.9%.