# Calculating return on investment on leveraged positions



## Ardyne (3 August 2009)

Example

Borrow $12,000 and buy 1000 Shares in xyz.
Use own money to buy 12 month put at $12.00 strike price for say $3,000.00.
Interest @8.25%  on the 12k for 12 months = $990.00
Div recieved are say $700.00 

Sell shares say at $18.00 at end of 12 months.

The amount of my own money needed to run this position i calculate to be MAX (by this I mean say I receive the div the day b4 I sell)

$3,000.00 for the put plus the $990 for the interest.
 = $3990.00

from selling the shares I received $6,000.00 (after paying back loan) plus $700 for divs minus the $990 interest minus the put price $3000.

= $6000.00 + $990.00 - $700.00 - $3000.00 = $2710 Profit

Should I calc return of 

1. $2710/$12,000.00 = 22%
or 
2. $2710.00/$3990.00 = 68%

thx


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## Largesse (4 August 2009)

well it depends on what you are after.

are you after return on capital? ( 2. $2710.00/$3990.00 = 68% )

or return on investment (which will include capital + leverage) ? 
(1. $2710/$15,000.00 = 18% )


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## jono1887 (7 August 2009)

i think he just wants to know how other cfd traders calculate it...


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