From Theory To Practice

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Return on Capital

From Theory To Practice

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

One of the fundamental building blocks to establishing a core foundation as a beginning trader is the understanding of return on capital (ROC). Return on capital is simply the return you generate in an investment, when you take into account how much capital you had to put up in order to earn that return. It allows us to easily compare two different competing trading strategies or two different investing ideologies. The equation seamlessly levels the playing field, especially when the time element is factored in, and the comparisons become truly apples-to-apples.

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