Annualized yield

Also called Annualized return, annualized ROIC

A short option's premium as a share of the cash or shares it ties up, scaled to a year so different expirations compare.

A short option's yield is what it collects against what it ties up: premium ÷ strike for a cash-secured put (the cash securing it), premium ÷ spot (or your cost) for a covered call. A two-day option and a 30-day option can't be compared on yield alone, so it's scaled to a year.

Two ways to scale

• Simple: yield × 365 ÷ days. The strike selector uses yield ÷ years to expiration, the same idea measured to the hour, and its minimum yield is annualized so one setting fits every expiration (10% a year is about 0.19% for a week).
• Compounded: (1 + yield)^(365 ÷ days) − 1, as if you repeated the trade all year at the same return. Wheel and income shows this, with the simple form under it.

Compounded is always at least the simple figure, and the gap grows on short expirations. Neither is a promise: it assumes every cycle goes the same way, with no assignment and no losses.