Running Yield

Introduction to Running Yield

One of the most critical concepts that investors need to understand in option trading with cryptocurrencies is Running Yield. So, what exactly does this term mean? The Running Yield is a financial metric, applied to measure the income return on an investment. It is typically represented as the annual income from an investment divided by its current market price.

The Concept of Running Yield

Running Yield is primarily used in fixed-income investments like bonds, but it's also applicable in the cryptocurrency options trading world. This gives traders an idea of what they can expect in terms of returns for their traded options, given their market value at a given moment.

Consider it this way: if you've bought a cryptocurrency option for $100, and you're expecting to make $5 from it within a year, then your Running Yield would be 5% (5/100).

Running Yield in Cryptocurrency Options Trading

When it comes to option trading with cryptocurrencies, Running Yield becomes crucial because it helps traders to gather the projected returns from a given cryptocurrency option. You can compare the Running Yield of different options before deciding where to invest. It becomes a tool to gauge the profitability of an investment.

How to Calculate Running Yield

Calculating the Running Yield can be fairly simple. The formula to find Running Yield is:

Running Yield = (Annual income from the option / Current market price of the option) x 100%

For example, if you expect an annual income of $10 from your option, and its current market price is $200, then your Running Yield would be 5%.

The Significance of Running Yield

To sum up, the Running Yield is an important concept in option trading with cryptocurrencies, as it helps traders to understand the likely return from their investment in a crypto option relative to its current market price. This measure helps traders to make informed investment decisions to maximize their potential profits.