OptionAutomator Options Trading Glossary:

Definition, Examples & Resources:Return on Risk'

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What is Return on Risk in Options Trading ?

Return on Risk
Return of Risk is an evaluation of the investment risk against the maximum return possible in the position.  Note that the risk of some positions may be considered 'unlimited' and therefore this value cannot be explicitly calculated.


How to Use in Your Brutus Options Ranker Strategy


Return on Risk simply measures the maximum potential return for an options setup divided by the maximum potential loss. It is used to assess the potential profitability of a trade.

You might want to consider the return on risk vs. annualized return on risk when comparing options of the same time-frame, especially when the contracts have a short duration.

Broader Term

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