# Decision Calculations

## Decision Calculations

#### **Rate of Return Calculation** <a href="#rate-of-return" id="rate-of-return"></a>

Rate of return is always calculated as max profit / max loss for all position types, where max loss is defined as the theoretical risk less any premium received.

```
Assume a credit spread where strike width = $2.00 and credit = $0.50, then

Max profit = 0.5
Max risk = 2.00 - 0.5 = 1.5

Rate of return = 0.5 / 1.5 = 33%
```

#### % Premium Calculation <a href="#percent-premium" id="percent-premium"></a>

The formula for % premium increase/decreased is:

$$
change\_{percent} = \frac {change} {price\_{open}}
$$

where$$change\_{percent}$$is equal to the net `change` in position value divided by the `openPrice` of the position, defined as:

```javascript
let {openPrice, markClose} = position;
let change = markClose - openPrice;
let changePct = change / openPrice * 100;
```

The definition for `markClose` calculations of individual position types can be found [here](https://docs.optionalpha.com/calculations/broken-reference).

#### **Return % Calculation** <a href="#return-calculation" id="return-calculation"></a>

```javascript
let {priceChange, openPrice} = position;
let returnPct = priceChange && openPrice ? priceChange / openPrice : 0;

//where priceChange = position.currentPrice - position.openPrice;
```

Percentage return measures the percentage gain or loss on an asset or portfolio relative to its starting value.

In the example above, the investor earned a $1,250 total dollar return on a $5,000 investment. To calculate the total return in percentage, simply divide the total gains ($1,250) by the starting value ($5,000) = 25%.

<figure><img src="https://cdn.prod.website-files.com/5fba23eb8789c3c7fcfb5f31/67056a07e53311e0da1d60e0_60d3bc7d4410c25409e7ef89_1091622_PercentageReturn_062321.jpeg" alt="Percentage return formula"><figcaption></figcaption></figure>

Total percent return can be a better indicator of return on investment because it shows growth relative to the initial investment.

#### Total P/L

The sum of open and closed P/L.

#### Total P/L %

The total P/L divided by the bot allocation.

#### Day P/L

The current intraday total P/L minus the previous days closing P/L value or $0 if no previous day.

#### Day P/L %

The day P/L divided by the previous day's closing net liquid or bot allocation if no previous day.

#### Closed P/L

The bot's P/L for all closed positions.

#### Win Rate

The bot's percentage of winning trades. Win Rate (win%) = number of wins divided by total number of closed trades.