Using ROO (%) to Identify Options
Using ROO (%) to Identify Excellent Canadian Options
If you’re new to Canadian options trading, one of the most important metrics to learn is ROO (%) – short for Return on Option. It helps answer a simple question: How much income can I potentially earn from this option trade, relative to the stock price?
What Is ROO (%)?
ROO (%) stands for Return on Option. It represents the annualized return you’d earn by selling an option, based on the premium collected versus the stock price.
For example, if you sell a 30-day call option for $100 on a $2,000 stock, the ROO is roughly 5%. If you could repeat that every month, your annualized return would be over 60% — before accounting for assignment, capital gains, or taxes.
Why Is ROO Important?
- Quickly compare opportunities across different stocks
- Focus on high-return trades without complex math
- Balance income vs. risk — higher ROO often means higher implied volatility
- Screen for options that fit your strategy (e.g., conservative vs. aggressive)
What’s a “Good” ROO %?
There’s no universal answer — but here are some general guidelines for covered calls in Canada:
- ✅ 2%–3% per month: Strong ROO with manageable risk
- ⚠️ 4%+ per month: Often high risk, high volatility
- 🔍 Under 1%: Likely not worth the trade unless extremely conservative
Of course, ROO should not be the only factor — also check open interest, earnings dates, news sentiment, and liquidity.
How Optrader.ca Helps
Optrader.ca automatically calculates ROO (%) for all eligible TSX and U.S. optionable stocks. You can filter by:
- Minimum or maximum ROO targets
- Expiry dates and monthly income strategy
- Delta and Implied Volatility to gauge risk
- News sentiment and earnings filters to avoid traps
Whether you're building a passive income portfolio or seeking monthly trades, ROO is one of the most important tools in your options toolkit.
Final Thoughts
ROO (%) is a simple but powerful way to screen for covered calls or puts. With tools like Optrader.ca, you can easily compare thousands of options in Canada to find trades that meet your income and risk goals.
