Three Different Numbers All Called Premium
Gross, net and kept are three separate figures, and most tools quietly report whichever flatters.
Course contents73 lessons · 28 questions
“I collected $4,200 in premium last year.” It is the most commonly quoted figure in options selling and one of the least informative, because at least three different quantities get reported under that sentence and they can differ by a factor of two.
The same trade, three numbers
Move the buyback and fees and watch the three figures separate. Switch to 'Still open' and the final one disappears entirely — which is the honest answer for an open position.
- Gross premium collectedthe number people quote
- +$250
- Cost to buy backonly if you closed early
- −$60
- Fees and commissionssmall, and always there
- −$3
- Premium kept
- +$187
Switch to “Still open” and the final figure disappears. That is the honest answer for an open position: the credit is in your account, and none of it is income until the obligation ends.
The three quantities
Gross premium. The credit that arrived when you opened. It never changes and it is the largest of the three, which is why it is the one people quote.
Gross = fill price × 100 × contractsGross is a fact about the opening fill and nothing else.
Net premium. Gross less anything paid to close or buy back. If you closed early at 50%, your net is half your gross. If you rolled three times, your net is gross less every buyback along the chain.
Premium kept. Net less fees, and only once the obligation has ended. This is the number that is actually income.
| Position | Gross | Net | Kept |
|---|---|---|---|
| Expired worthless | $250 | $250 | $247 |
| Closed at 50% | $250 | $125 | $119 |
| Rolled twice, still open | $1,050 | $340 | — |
| Bought back at a loss | $250 | −$310 | −$316 |
Four positions, all reported as '$250 of premium' by someone.
The third row is where this becomes serious. A rolled chain accumulates gross credits with every leg — $1,050 across three tickets — while its net is $340 and nothing at all is kept yet. Reporting gross on a chain like this is not a rounding difference; it is off by three times.
Which figure answers which question
How active have I been? Gross. It measures how much premium you wrote, which is a genuine measure of activity and capital turnover.
What did this position net? Net premium. The right figure for evaluating a single trade or chain.
What did I earn? Kept. The only one that belongs in an income figure, and the only one that reconciles to your account.
The test for any tracking system: ask it for premium and see whether it makes you specify which. A system that reports one number labelled “premium” is ambiguous by construction.
Fees are small and then they are not
Two or three dollars per contract round trip sounds like nothing. On a $250 credit it is 1.2%. Across 60 trades a year it is $180 — which on a $50,000 book is a third of a percent of annual return, taken quietly.
Assignment and exercise fees are charged separately from commissions at most brokers, and they land on exactly the trades that already went against you. They belong in the kept figure, not in a footnote.
What can go wrong
Quoting gross as income. Especially misleading on rolled chains.
Reporting kept on open positions. Nothing is kept until the obligation ends — see realised versus unrealised.
Omitting fees. Small per trade, and a consistent bias across a year.
Comparing your figure to someone else's without asking which one it is. Most premium-income comparisons online are comparing different quantities entirely.
Key takeaways
- Gross, net and kept are three different numbers, and 'premium collected' is used for all three.
- Gross never changes and is the easiest to record, which is why logs default to the most flattering figure.
- On a rolled chain gross can be several times the net, because every leg adds another credit.
- Nothing is 'kept' while the position is open — that figure only exists once the obligation ends.
- Fees are 1%+ of a typical credit and land hardest on trades that already went badly.
Check your understanding
1. A chain opened for $250 and rolled twice, each roll paying $810 to close and collecting $900. What is gross, and what is net?
2. Which figure belongs in an annual income number?
3. Why do tracking systems tend to report gross by default?