The MAR Ratio: How Professional Money Managers Actually Measure Trading Performance

by Roger Scott | Jun 29, 2026

Most traders obsess over their win rate. Some track average gains versus average losses. But here’s what the pros are actually looking at — and it’s a number that will completely reframe how you think about performance.

It’s called the MAR ratio, which stands for Maximum Adverse Risk, and institutions, hedge funds, large private banks and associations managing over $100 million all use it to measure performance. If you’ve ever managed money professionally, you know this number cold.

If you haven’t, buckle up — because understanding it changes everything.

The Math Is Simpler Than You Think

The MAR ratio is just a simple division. You take your average return and divide it by your maximum drawdown. That’s it. So let’s walk through it.

If your average return is 10% and your max drawdown is also 10%, your MAR ratio is 1. Not great, but balanced. If your average return is 10% but your max drawdown is 20%, your MAR drops to 0.5 — meaning you’re giving back twice as much as you’re making on a risk-adjusted basis.

Flip it around: If your max drawdown is 10% but your average profit is 20%, your MAR ratio is 2. That’s a strong number. That’s what institutions want to see.

Here’s the part that catches most traders off guard. Institutions focus on the worst damage your account has ever taken, not the smooth averages you might prefer to highlight.

You could have an average drawdown of 10% for the year, but if at any point you were down 30%, that 30 becomes the number that defines you. One rough stretch — not the comfortable average — is what gets plugged into the equation.

It’s a completely different way of thinking about risk, and once you understand it, you realize why professional risk managers see portfolios the way they do.

Why This Is a Game-Changer for Options Traders

Now here’s where it gets really interesting — and this is the insight most retail traders completely miss. How much money you make is not a function of your trading skill alone.

It’s a function of how much drawdown you can withstand over time.

Read that again, because it’s the key to everything.

Options give you leverage — serious leverage. And because of that leverage, drawdowns on options can be really big. But that isn’t a sign of poor trading. It’s the natural byproduct of using a high-octane instrument.

The upside is that the same leverage that creates deep drawdowns also creates the potential for outsized returns. You’re not generating big numbers because you’re some market whisperer — you’re generating them because the structure of the instrument amplifies both sides of the equation.

This is why the MAR ratio is so important. If you’re willing to accept an 80% drawdown on your options position, you can target 160% returns and your MAR ratio will still hold at 2.

It’s not reckless — it’s a disciplined framework applied to a leveraged asset. Professionals understand this tradeoff. They aren’t fooled by big returns, and they aren’t scared by big drawdowns. They look at the relationship between the two and decide whether the performance makes sense for the risk taken.

Once you start viewing your performance through this lens, everything shifts. You stop asking, “How much did I make?” and start asking, “How much did I make relative to my worst drawdown?”

That’s how the pros think — and now you can too.

Start calculating your own MAR ratio. You might be surprised what it reveals.

I hope that helps!

Roger Scott
Roger Scott Trading

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