Options Glossary

Glossary: Return on Risk

Last Updated: May 1, 2018


Return on Risk

What Does Return on Risk Mean in Options Trading?

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 the Brutus Options Ranker

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.

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