Hi All,
Just wanted to understand what is a decent benchmark for option sellers. While i looked at my P&L for this FY, these numbers came out:
- My profit (excluding broking/govt taxes) stands at 12.90% of the overall turnover
- My broking+Govt. taxes are 7.12% of the overall profits
What is a decent number on these params ? Or is there a param which i’m overlooking ?
@Jason_Castelino and other option sellers on TradingQ&A, need your insights on this
Not sure if I am the right person for this since my style of option selling is very different from that of most others. Anyways, let me share some numbers.
I am of the opinion that risk and return move in the same direction. So if you are making higher return, whether you know it or not you are taking higher risk. Margin for my OS selling comes from 90 percent collateral and 10 percent cash. So I always measure my returns at account level. My target is just 25 to 30 percent per annum.
Not sure how you have calculated turnover. If it is as per the guidance notes issued my icai, then mine is around 70 percent of turnover.
On the basis of contract value as turnover, I have never calculated.
But I don’t see any meaning in this number either.
Return should be measured in the basis on capital employed. Your turnover can increase if you are taking hedges. I go naked and I win 95 percent of the times. So obviously turnover is lower. So right base would be the account value.
Mine is around 2 percent. Again it has got a lot with the win ratio since expenses are there irrespective of whether you earn profits or incurre losses.
Not even on margin. It should be calculated on account value. If you take a trade with 1 lakh margin, you would still keep 20k extra in your trading account. So return should be a percentage of 1.2L
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First time i have heard someone mentioning their return as percent of turnover.This metric is useful for tax purposes.
In general conversations, we calculate return as percent of capital. My return this FY has crossed 100%+. I am taking around 3% risk per day which is high and had drawdowns of 9% twice.