The positive relation between risk and expected returns lies at the core of financial theory. Empirically, this relation is negative. We verify that the risk-return relation holds in expectation using regressions of option-based expected returns on option-based variances. This relation breaks down when in these risk-return regressions, we replace option-based expected returns with realized or fitted returns from predictive regressions. To the contrary, the positive relation is preserved when we replace option-based variances with realized or fitted variances. We conclude that the risk-return tradeoff is true in expectation, and that empirically it breaks down due to realized returns not realized variances.