motivated by e-mail from Steve N.
Here's the problem:
I buy a bunch of stock and immediately sell (or write) a call Option.
>I assume there's a magic formula?
I borrow some money to help pay for the cost of the transaction ... at some borrowing rate.
After a while, the Call is exercised and I sell my stock at the Strike Price and repay the money I borrowed.
The question is: "What's my annualized return?"
Yes: My initial outlay of money is: $A = (Price of Stock) - (Amount Borrowed) - (Call Premium)
After a time T years I receive: $B = (Strike Price) - (Loan Payment)
My $A has turned into $B in T years, so my annualized return is: CAGR = (B/A)1/T - 1
>I click on the picture to get the spreadsheet?
>So what's all that Black-Scholes stuff?
Aah ... if'n you wanted to check the call premium against the Black-Scholes estimate, you could enter some additional numbers, like
Time to Expiry, Volatility and Risk-free Rate. Or, you could just ignore that stuff.