Shorter-Dated Options Generate the Highest Annualized Returns

When selling cash-secured puts (or covered calls), large dollar premiums are enticing. Is a $17.00 premium better than an $11.00 premium? How about a $20.00 premium better than that $17.00 premium? Before you answer “yes, of course, don’t forget to factor in the time to expiration. Typically, shorter-dated options generate the highest annualized returns. In this article, a real-life example with Invesco QQQ Trust (Nasdaq: QQQ) will be analyzed to confirm this principle.

Real-life example with QQQ

• 2/6/2026: QQQ trading at 602.28
• 2/6/2026: The 3/13/2026 $590.00 put shows a bid price of $11.71
• 2/6/2026: The 4/17/2026 $590.00 put shows a bid price of $17.10
• 2/6/2026: The 5/15/2026 $590.00 put shows a bid price of $20.67
• Are these listed worst-to-best or best-to-worst? Let’s see.

QQQ put calculations using the BCI Trade Management Calculator (TMC)

• Red oval: Days-to-expiration (DTE) for each contract
• Yellow field: Breakeven (BE) price points: larger premiums have the lowest BE prices
• Brown field: Initial returns: Shorter dated options have the lowest initial returns, before annualizing
• Pink field: Initial annualized returns: Shorter-dated options typically have the highest annualized returns

Discussion

When evaluating option premium returns, in addition to the premium dollar amount, we must also factor in time-to-expiration. The best way to accomplish this is to annualize our returns. This will allow us to compare “apples-to-apples” when making our trade decisions. Our BCI Trade Management Calculator (TMC) will achieve these computations for us.