That’s hedging. High profit with low risk. That’s the whole game played inside this publication.

This week’s video walks through one live position from the Machina Capitalis playbook. It’s not a theoretical example, it’s an actual trade. Showcasing what this looks like in practice in its most basic form is the aim.

The trade

On 26 May, Abacus Global (ABL) was trading at $8.98. I bought 1,500 shares and simultaneously sold 15 call options at the $7.50 strike, expiring 15 January 2027.

That’s it. That’s the entire structure. Buy the stock, sell a call so deep in the money that most of its value is intrinsic, not extrinsic. No ratios, no delta-neutral engineering. Sometimes the returns I seek are made simple enough by the premium offered by the market and I don’t have to use any of the aforementioned techniques. Here’s what the setup did for me:

• Premium collected: $2.47 per share

• Effective cost basis: $6.51 (versus $8.98 spot)

• Downside cushion: 27.5% — the stock can fall over a quarter before I lose a cent

• Locked-in profit: $1,485 on $9,765 of capital deployed if assigned.

• Return on capital: 15.2% over 234 days — annualising to ~ 24%

Since entry, ABL has run to $10 — past the strike, tracking toward max profit and I haven’t touched the position once.

Important — Compare that to buying the 1,500 shares uncovered. At today's price of $10, the naked stock is up 11.4%, with no downside protection at all . Any drop below $8.98 and it’s straight into a loss. My hedging has already locked in 15.2%, with a 27.5% downside buffer before I lose anything. Currently, it's not even a trade-off: I'm beating the naked stock on return while carrying a fraction of the risk. The only cost is going forward: my covered call has hit its ceiling and won't earn another cent, while naked shares would keep running with the stock in the event of a strong rally.

Past performance is no guarantee of future performance. This is not investment advice — it’s a transparent walkthrough of one operator’s process.

Why this matters more than the number

The 24% isn’t the point. The point is how little it costs me to get it. Once the trade is entered I only keep a cursory eye on it to see if the stock price approaches the breakeven point of $6.51 anytime from entry until expiration. I’m not forecasting Abacus. I’m not bullish or bearish on it. I built a spread with a locked profit margin and a large error buffer and then I turn my attention elsewhere.

That matters because Machina Capitalis isn’t a portfolio I manage from a desk. It’s built to run from whatever time zone I happen to be in, therefore I want it to be as simple as possible.

The scaling logic

I think of this type of positions as one player on a team. Run twenty positions like it, each capped at 5% of the book, spread across uncorrelated names, and I get a diversified income engine with no single-month blow-up risk — while still yielding something in the mid-20% per year on capital that simultaneously has a lower risk profile thanks to the in-built downside cushion.

In my previous piece, I examined the relationship between returns, living expenses and required working capital requirements needed to have a realistic shot at running this as a serious business from which to make a living.

In many large Cities outside of the OECD countries, a family of 4’s cost of living is estimated at approximately $30-$55,000 USD, with Asia being the best value.

The estimates in the above article are supported by our friend who was kind enough to share his expenses this week on X.

A conversation worth your time: I caught up with Mara today - not just to talk cost of living, but to dig into whether this whole basic system works for someone other than myself. He's been running the basic structure for a while now, using it to try to replace a chunk of agency income he's at risk of losing this September.

His answer, in his own words: it took a couple of months to click, but once it did, risk turned out to be minimal and the passive income real.

If I take the high end estimate of $55,000 and could theoretically scale the above returns of the basic ABX trade at 24% PA the required capital to cover such expenses would be $55,000/0.25 = $229,166.67 in working capital required.

Obviously one would include a buffer, calculate a range of likely return scenarios, account for inflation and withdrawal rates etc and not rely on such a calculation down to the decimal place, but thinking for oneself using first principles math and a little outside-the-box creativity can give a sense of what’s possible; living a comfortable lifestyle with much less starting capital than might otherwise be expected.

Where the edge actually is

What you’ve just read is the shallow end. The simplest tactic in the system. If you’re interested in accessing the entire playbook: every trade, position sizing, and the alerts as they go out — that’s what premium membership is for.
Use this code for 25% off your premium subscription - Forever!

Disclaimer

Machina Capitalis is a personal publication produced for informational and educational purposes only. It documents the author’s own opinions, research, and trading activity. Nothing in it constitutes financial, investment, legal, tax, or accounting advice, nor a recommendation, offer, or solicitation to buy, sell, or hold any security, derivative, or other financial instrument.

The author is not a licensed financial adviser, broker, or registered investment professional, and no advisory or fiduciary relationship is created by your reading this publication or holding a subscription to it. Content is general in nature and does not account for your objectives, financial situation, or needs. Before acting on anything discussed here, conduct your own research and consult a licensed professional in your jurisdiction.

Options, margin, and short selling carry substantial risk and are not suitable for every investor. Strategies involving short options or inverse and leveraged instruments can result in losses that exceed the capital initially committed, in some cases without limit. Returns, yields, and annualized figures cited are specific to the author’s positions, timing, and account, are frequently illustrative or estimated, and should not be relied upon. Past performance — the author’s or anyone else’s — is not indicative of and offers no guarantee of future results.

The author holds, and actively trades, positions in many of the securities and instruments mentioned, and those positions may change at any time without notice. Statements about the author’s intended actions are not commitments and may not be acted upon. Prices, figures, and positions referenced were current only as of the time of writing and will have changed.

Information believed reliable at the time of publication may contain errors or omissions, and is not updated for subsequent developments. To the maximum extent permitted by law, the author accepts no liability for any loss arising from reliance on this material. You act on it entirely at your own risk.

This piece is a record of my own trading for educational and illustrative purposes. It is not financial advice, not a recommendation, and not a solicitation to buy or sell any security. I hold the Abacus position described, and I may add to it, reduce it, roll it, or close it at any time without notice. Nothing here accounts for your circumstances, goals, or risk tolerance.

Options carry substantial risk and are not suitable for every investor. A covered call caps your upside and does not protect against loss below your net cost basis; writing calls against shares you do not own is a different and far riskier proposition that I am not describing here. Averaging down into a falling position can compound losses as easily as it lowers a cost basis. You can lose money — including more than you expect — trading these structures.

All prices, figures, and probabilities are as at the dates stated and will have changed by the time you read this. I am a private investor sharing my own process, not a licensed adviser. Do your own work, and consult a licensed financial professional who knows your situation before acting on anything you read here.

Profit & Loss Statement

Read more

In Proud partnership with The Solstice Laboratory — the physics of markets, quantified. Read The Entropy Trap to discover what physics knows the economics doesn’t.

Why an income book has to behave differently from an investment book.

Can I lock in an acceptable annualized return and reduce my downside risk by 65-99%?

Read on you splendid thing!

Most options content sold to retail is really directional in disguise: selling puts or basic covered call writing is still essentially going long except the upside is capped. Effectively the way most options pundits purport to use tactics which don’t really reduce one’s risk but do cap their upside reward - in other words the opposite of the goal!

An income book has a different job. It has to produce cash flows and profits regardless of what the underlying markets decide to do in the meantime. That reframes the entire objective: the goal isn’t to be right about stock price direction. It’s to be paid for time and volatility while staying as indifferent as possible towards an assets price movement.

This piece examines: can a systematic options structure produce a real, competitive annual return while keeping price exposure (delta) near zero? Here I explain with real numbers on a real name — Agnico Eagle Mines (AEM).

Spoiler — the answer is yes, but requires an asterisk.

Options in three sentences, if you’ve never touched one

A call option gives someone the right to buy your stock at a set price (the “strike”) by a set date. If you sell a call against stock you own, you get paid up front (the “premium”) in exchange for capping your upside at that strike — you’re renting out your shares’ future gains. Everything below is just different ways of tuning how much you rent out, and managing overall exposure.

Why delta is the whole game

Delta measures how much a position moves per dollar the stock moves. 100 shares of stock is 100 deltas; that’s full participation, up and down. In an investment portfolio that’s fine. An income machine is a little different. I don’t want a down month in stocks to also be a bad month for my grocery budget. So the mandate becomes: collect premium, but manage the structure so directional risk stays small relative to the capital deployed.

The base case: a deep-ITM covered buy-write

Take AEM, not a suggestion, just a random example for argument’s sake, trading at $137.76. Buy 100 shares (delta now 100), sell the 65 delta, a deep-in-the-money call (Jan 2028, $135 strike) against it for $33.55. That lowers the overall delta, or stock exposure to 35.

What does that do for me as a trader?

• Net cost drops to $104.21/share — a 24.4% cushion before you’re underwater

• Max profit is capped at $3,079 if the stock is called away, roughly 19.5% annualized

• Net delta falls from 100 to about +35 — a 65% cut in directional exposure, just from selling one call

Upon entry, a 29.5% profit margin is secured while the initial working capital is protected. Less directional risk than owning the stock by itself, real income, real cushion. But let’s explore further possibilities.

Turning the dial further: the ratio write

Let’s assume I wish to reduce my overall exposure from 35 above to 0 — or close enough. Here’s how I might do it; Go further out of the money and sell two 49-delta calls against the same 100 shares instead of one 65 delta call. Here something interesting happens to the delta math:

• Long 100 shares (+100 delta) and short 2 x ~50 delta calls at the $170 strike for the same expiration date. Now my delta nets out to +0.94 — essentially flat

• Downside cushion widens to 31.8% (breakeven $93.45, vs $104.21 on the single-call version)

• Max profit more than doubles to $7,654 — ~54% annualized

The asterisk: One contract in that 2:1 ratio stays covered by the shares. The other doesn’t. Past $170, that second call is naked — the position caps out and starts losing money again above $246.55, with no ceiling on the loss. Near-zero delta today isn’t the same as staying near-zero over time: the “hedge” only holds inside a range.

Comparison

This is the trade-off in plain terms: more premium and a wider buffer, but more management is required as now the position is not fully covered and the trade will need to be monitored and adjusted to remain delta neutral to follow the price movements over time.

Circling back

If a structure like this could realistically produce annualized returns in the high-teens (the mid 50% shown in the example would be preposterous to use as a base case for underwriting), while keeping delta near flat, the next question naturally is; how much capital does that actually take to replace an income?

Answered by simple arithmetic: Assume $45,000/year in expenses — a reasonable audited baseline for a modest, geographically flexible lifestyle. Here’s the capital required at a range of assumed yields, including the two we just walked through:

The honest version of this exercise isn’t “learn to do this and quit your day job”. It’s to gain awareness from exploring what’s possible and testable.

The Take Away - What’s The Point?

None of this is really about AEM. It’s about building an income source that doesn’t care where I am, doesn’t need a boss, doesn’t need employees, and doesn’t even need clients (at least none with whom I have to deal with directly). No physical inventory, no storefront, no team to manage, no fixed hours. The whole engine runs from a laptop and a brokerage account. For me, it’s been run in Mendoza, in Melbourne to Milan (to pchoose the M’s)

That’s really the product IMO: a business with none of the usual anchors. Cash flow that crosses borders alongside me, built on discipline instead of headcount.

If that’s the kind of independence you’re building toward, subscribe free — every week I break down one real structure like this, mechanics fully shown, so you can see exactly how the engine works, not just take my word for it.

Members get: Trades, Guidance, Performance updates and much more.

One for the comments: How interest are you in learning more about these types of systems?

All the best.

Benjamin

Machina Capitalis machinacapitalis.com · @TheRoyaltyKing

Educational illustration only, not investment advice. Options involve risk, including the potential for unlimited loss on naked short calls. Past structures and hypothetical returns are not guarantees of future results. Consult a licensed advisor before implementing any options strategy.Educational and informational content only. Nothing in this piece constitutes investment, legal, tax, or financial advice, nor a recommendation or solicitation to buy or sell any security, option, or other instrument. No advisor-client, fiduciary, or professional relationship is created by reading, subscribing to, or interacting with this newsletter.

The examples shown (including AEM) are illustrative and, where marked as such, hypothetical or theoretical — they do not represent actual trades, recommendations, or a real-time portfolio, and any resemblance to positions the author may hold is coincidental to the teaching example, not a disclosure of current holdings. The author may hold, have held, or later take positions in securities or instruments discussed here; this is a potential conflict of interest and should be weighed accordingly.

Options trading involves substantial risk and is not suitable for every investor. Strategies described — including covered calls and ratio writes — can result in losses up to and including the total capital deployed, and structures involving uncovered (”naked”) short options carry the potential for losses that are substantial and, in some cases, theoretically unlimited. Annualized return figures are simple projections based on stated assumptions at a point in time; they are not historical performance, are not audited, and are not guarantees or predictions of future results. Past or hypothetical performance is never a reliable indicator of future performance.

Market data, pricing, and Greeks referenced were sourced from third-party platforms believed reliable at the time of writing but not independently verified, and may be inaccurate, delayed, or since changed. Every reader’s financial situation, risk tolerance, tax position, and goals differ; nothing here should be applied to your own decisions without independent judgment and, where appropriate, consultation with a licensed financial advisor, broker, or tax professional in your jurisdiction. This content is not directed at, and should not be relied upon by, residents of any jurisdiction where its distribution would be contrary to local law or regulation.

The author and Machina Capitalis disclaim all liability for any loss or damage arising, directly or indirectly, from reliance on this content. By reading further or acting on anything here, you accept that you do so entirely at your own risk.

“ How much capital do I need to do this?”

This is by far the most common question I receive from readers who fancy building a borderless income stream of their own by running a one-man hedge fund, as I have. The answer to such a question is inherently personal and therefore necessarily nuanced, but nuanced does not mean unknowable. So today I am going to do something slightly unusual for this publication and write the answer as a recipe: from ingredients to step-by-step method along with a dash of my personal notes. By the end you will have your own number, and you will understand why each input belongs in the dish.

What’s on the Menu?

Freedom, fast-tracked.

Serves: One, adjust expenses according to number of people.
Preparation time: one afternoon
Cooking time: Varies with the individual, but years rather than decades for most readers.

Ingredients:

• Your personal expenses - download all your bank statements and ask Claude et al. to calculate your monthly and annual expenditure (takes 5 mins).

• One honest assessment of your skill level in generating investment returns (this ingredient cannot be substituted)

• The formula: Freedom Number = Annual Expenses × Capital Multiple

• A capital ladder (supplied below)

• Optional: Re-location costs towards a more budget/tax friendly location

• Optional (but recommended) A subscription to this publication

Method

Step 1 — Clarify The Core expenses

It’s key to distinguish between core (non-negotiable) and discretionary spending. For example, I have recently spent a lot of money on a trip to Italy - including a private tour of the Vatican etc - and all sorts of cool-but-expensive things. Obviously these are not core expenses. The key question to answer is how much is the non-negotiable cost of living for you and your family?

The mid-range estimate for the median annual cost of living in the USA is ~$25,000 for a single person to ~$60,000 per family.

Step 2 — Run The Formula

Freedom Number = Annual Expenses × Capital Multiple.

If we take that figure to a generic financial advisor they would reflexively apply the 4% withdrawal rule which assumes that in order to retire, the average portfolio can spend up to 4% of their savings per year and fund a retirement of ~30 years before the capital is all spent.

To calculate the capital required for one’s annual expenses above to equal a withdrawal of 4% simply calculate expenses by 25:

$25,000 × 25 = $625,000 for our single person.
$60,000 × 25 = $1,500,000 for the family.

Sit with that for a moment, because these numbers are disheartening for most. They require decades of diligent saving, a bull market that cooperates, and a retirement that arrives roughly on schedule with your pension — assuming one’s government has not changed the rules by that time. Of course there’s nothing wrong with this per se, but for my taste it’s completely unacceptable. It’s worth explaining that this rule was based on the 60:40 portfolios of the ‘80s and is only slated to last 30 years — I am in my 30s and don’t want to wait 20-30 years to enjoy independence.

Now look again at the formula.

Freedom Number = Annual Expenses × Capital Multiple.

Two variables. The industry treats both as constants yet neither is fixed. The rest of this recipe is the pulling of two levers and the discovery that when you can effect both of them, the barrier between you and your freedom shrinks non-linearly!

Step 3 — Adjust Lever 1: Expenses

For geographically flexible individuals, your expense number is more malleable than you think. A similar lifestyle: food, housing, internet , school fees etc — is priced differently in Melbourne than it is in Medellín (although I don’t recommend either). Reprice the core from Step 1 in a jurisdiction chosen deliberately rather than inherited, and you often find that 40–60% typically falls away.

In other words, the $60,000 PA family life might become $30,000–35,000 PA with less loss of luxury than one might expect.

Side note: If you earn in a hard currency and spend in a softer one, every tick of exchange-rate drift lowers your hurdle without you lifting a finger. My book is denominated in US dollars; my expenses are not. Expenses in the weak currency, income in the strong one — never the reverse.

Step 4 — Pull lever 2: Increasing returns

Climbing the capital ladder. And this takes work.

Above, we applied the standard rule of multiplying expenditure by 25. But ask yourself, why 25? Because 4% is the yield of someone who has effectively agreed, in advance, to know nothing. It represents the lowest historically reliable yield of institutional capital: index funds with no room for judgment, nor selection. It is the capital requirement of assumed ignorance. Arithmetically, the moment you upgrade your skills to improve on a 4% withdrawal rate, the required multiple falls precipitously. Let’s examine how improving one’s capital returns and by extension, permissible withdrawal rate, can drastically lower the initial starting capital required.

Rung 2 of the capital ladder represents ownership of superior businesses with inflation-protected free cash flow yields: the exchanges and royalties so often mentions in my other publication.
Rung 3 is the basic operating system documented in this publication, which stands today at 23.5% over 6.5 months — of course this is no guarantee of future performance etc etc.

Rung 3 is the most individually variable hence it is imperative that the reader apply an honest estimation of the returns they are able to generate with their individual skill set.

Step 5 — Multiply both levers

This is where the magic can happen thanks to an old friend — leverage.

Let’s run a hypothetical by pulling both levers simultaneously: reducing expenses and climbing up the capital ladder.

Potentially then, perhaps not the same lifestyle, but similar is theoretically possible with 50-90% less capital. Notice what the two levers do when pulled together: they multiply rather than add. The central point here is that with some intelligent design and the adoption of new ideas, one’s life can shift from coping to thriving.

Chef’s Notes:

I began the year experimenting with $50,000 to seed Machina Capitalis and documenting the progress. Fairly quickly I was satisfied with the scalability of the project and determined that the optimal seed capital was ~$250,000 USD.
Why $250K? My personal expenses run about $45,000 US per year (ok you got me - I spend way too much, but it’s well covered by multiple income streams). I planned a range of ROIC (return on invested capital) of 18-30% ergo, calculating conservatively, the seed capital should be $45,000 ÷ 18% = $250,000.

In practice: I withdraw what I spend, not what I earn. The difference stays in the book as working capital — remember, this is an operating business not an investment portfolio. Once that surplus grows large enough, I move it across to my long-term portfolios. The fund pays for life; the long-term portfolios build wealth.

Important note: Taxes have been ignored here as each individual’s situation will differ, but none the less it should form part of year expense calculations.

All of this is less exotic than you might think - I merely suffer from exotic tastes!
An honest expense audit, a deliberately chosen location and a yield you can actually defend are the starting points. Run the recipe with your own figures this weekend and I suspect you will find what I found: freedom is not thirty years away. It is a design problem, and design problems have solutions.

I document mine in real time inside Machina Capitalis: every tactic, every trade and every month’s income — warts and all.

If you’d like to be a part of the group — subscribe today.

Subscribe now

Until next time,
Benjamin.

Disclaimer

Machina Capitalis is a personal publication produced for informational and educational purposes only. It documents the author’s own opinions, research, and trading activity. Nothing in it constitutes financial, investment, legal, tax, or accounting advice, nor a recommendation, offer, or solicitation to buy, sell, or hold any security, derivative, or other financial instrument.

The author is not a licensed financial adviser, broker, or registered investment professional, and no advisory or fiduciary relationship is created by your reading this publication or holding a subscription to it. Content is general in nature and does not account for your objectives, financial situation, or needs. Before acting on anything discussed here, conduct your own research and consult a licensed professional in your jurisdiction.

Options, margin, and short selling carry substantial risk and are not suitable for every investor. Strategies involving short options or inverse and leveraged instruments can result in losses that exceed the capital initially committed, in some cases without limit. Returns, yields, and annualized figures cited are specific to the author’s positions, timing, and account, are frequently illustrative or estimated, and should not be relied upon. Past performance — the author’s or anyone else’s — is not indicative of and offers no guarantee of future results.

The author holds, and actively trades, positions in many of the securities and instruments mentioned, and those positions may change at any time without notice. Statements about the author’s intended actions are not commitments and may not be acted upon. Prices, figures, and positions referenced were current only as of the time of writing and will have changed.

Information believed reliable at the time of publication may contain errors or omissions, and is not updated for subsequent developments. To the maximum extent permitted by law, the author accepts no liability for any loss arising from reliance on this material. You act on it entirely at your own risk.

This piece is a record of my own trading for educational and illustrative purposes. It is not financial advice, not a recommendation, and not a solicitation to buy or sell any security. I hold the Abacus position described, and I may add to it, reduce it, roll it, or close it at any time without notice. Nothing here accounts for your circumstances, goals, or risk tolerance.

Options carry substantial risk and are not suitable for every investor. A covered call caps your upside and does not protect against loss below your net cost basis; writing calls against shares you do not own is a different and far riskier proposition that I am not describing here. Averaging down into a falling position can compound losses as easily as it lowers a cost basis. You can lose money — including more than you expect — trading these structures.

All prices, figures, and probabilities are as at the dates stated and will have changed by the time you read this. I am a private investor sharing my own process, not a licensed adviser. Do your own work, and consult a licensed financial professional who knows your situation before acting on anything you read here.

That system is the intellectual foundation of Machina Capitalis. I’ve adapted it to the modern options market, and in today’s video I show you the backbone of it: the deep-in-the-money buy-write, structured not for the yield-chasing you’ve seen a hundred times on YouTube, but for a locked-in spread with a downside cushion large enough to survive a market event.

The distinction matters, so let me be blunt about it. The popular version of the covered call: buy a stock you like, sell an out-of-the-money call “for income”, is a contradiction. It’s investing with the upside amputated. This is not that.

In my basic system the profit is calculated and locked at entry, the strike sits deep in the money, and assignment is a good outcome. If the profit calculator says no positive profit exists, the trade does not exist. Premium is the point; direction is someone else’s problem.

In the video I walk through a live example. Gold Royalty Corp (GROY) at a spot of $2.88, selling the June 2027 $2.50 call, for a break-even of $1.46. That is a 49% downside cushion. The stock can nearly halve before the position loses a dollar compared to a 71% return to expiry if assigned. Finding set-ups like that is most of the work.

And because nobody should show only the trades that worked, that’s not what I do here in Machina, I also walk through one that went against me. My CME campaign entered on the 1st of April and promptly sank underwater. What followed is the actual product of this publication: ten weeks of selling calls against the position, banking $2,103 in premium — 7.4% of the position’s cost — and grinding the break-even down from $284 to $263. The position is repaired by cash flow, not by hope. That is what management looks like, and it’s the part that seperates a pro from a schmo.

For premium members, the video continues into the full live book: the short path-dependent ETF overlay, the hedge decisions I made this week on QQQ, SPY and VIX, the ongoing TPL poor man’s covered call campaign — including some management I had to do to handle the trade’s volatility and my exact entry workflow from calculator to fill. In the next piece I’ll answer the question this entire project exists to answer: how much capital do you actually need to live off your capital alone?

At an 8% return versus a 25% one. The difference is not incremental. It changes what’s possible.

Machina Capitalis is educational documentation, not financial advice. Options involve significant risk of loss and are not suitable for all investors. Real positions are shown for transparency, not replication. Past performance is no guarantee of future results. Do your own research and consult a licensed adviser.

Read more

No investors, no office, no payroll — just capital, a handful of option structures, and an old idea of Ed Thorp's. Here is the whole system, the live trades, and — for members — the exact orders I'm placing this week.

There is a particular kind of freedom in answering to no one.

I don’t run a hedge fund in the regulatory sense; there are no limited partners, no capital calls, no quarterly letter I owe to anyone but myself and the readers who choose to look over my shoulder. It is a book of my own capital, operated from wherever I happen to be standing, built for a single purpose: to generate cash flow that does not depend on a post code.

So why would anyone want to do that? Because the alternative, for me, had stopped making sense. I came out of COVID having spent years building private businesses and rolling them up, and the world I returned to was not the one I had left. The effort-to-reward had quietly inverted. More to the point, none of it travelled. You cannot fold a service business into a carry-on. You cannot take real estate through customs. I wanted the thing that an in-person enterprise can never give you — the ability to deploy capital, and harvest income from it, from anywhere — and I set about building it deliberately. The first sketches of this idea were drawn in Panama in 2023. This publication is the documentation of where they led.

A necessary word before any of the rest. Nothing here is advice. I share only real trades I have on or am putting on, alongside the occasional theoretical deployment, for the record. Past performance guarantees nothing. There is no guarantee of any performance whatsoever. This is a journal, not a tip sheet.

Where the book stands

Year-to-date, the number that matters most to me is twenty-two percent — those are the realised gains in 6 months. Realised = banked, already accounted for. Not a mark, not a hope: cash. That comfortably covers the income the book is supposed to throw off, and it leaves a discussion for another day about the returns on the capital I actually put down versus the capital I get to use.

That distinction is the whole game. An insurance company makes its money on the float — on money that is not, strictly speaking, theirs. I have no desire to run a property-and-casualty insurer. I have every desire to borrow its philosophy and apply it to the one asset class most people refuse to treat as an asset class at all: leverage itself, handled with respect.

The engine is sixty years old

Keeping it as simple as I can, the core of what I do is an adaptation of Ed Thorp’s warrant-hedging system. If you’ve read Beat the Market — I keep a first edition — you’ll know the shape of it. Thorp used the mathematical relationship between a warrant and its underlying stock to construct positions that locked in something close to a guaranteed profit; market-neutral, indifferent to whether the index went up or down. It worked beautifully through the 1970s, a decade in which the stock market did poorly and inflation did as it pleased.

I believe that past may be somewhat prologue. So I have spent a long time sitting with Thorp’s original idea and asking how a single operator, today, with a modern options chain instead of a warrant book, might express the same thing. The answer is Machina Capitalis — a capital machine, rebuilt out of option structures.

3 Very Important Tactics

There are six structures I run. The three that carry the weight are the hedged longs — which is a dignified way of saying deep in-the-money covered calls, or buy-writes.

The mechanics are unglamorous, which is precisely the point. I own an asset I want to own. I write a call against it, lately quite deep in the money. In exchange I receive a fat premium that gives me a built-in downside cushion and a defined, knowable maximum upside. I can set the trade for six months, twelve, sometimes twenty-four. I know my worst case and my best case the day I enter. I have come, over time, to prefer this kind of elegant simplicity to almost anything else — because it is operationally efficient, and because, when done with patience it pays twenty, twenty-five, thirty percent implied returns simply for entering. You get paid to show up. This is my version of Thorp’s basic system.
It’s not as easy as it sounds - I need to adjust the ratio of long:short exposure as the trade unfolds if I wish to remain delta-neutral.

The second structure is the cash-secured put, and I do it the unfashionable way. I sell a long-dated, out-of-the-money put on a name I would be glad to own, collect the premium up front, and take the stock at a discount only if it ever reaches my strike. I do not sell weekly puts and roll them month over month. That sounds wonderful in a thread and works for almost no one over a full cycle. Recently I closed some Fermi puts I’d sold fifty-nine days earlier — for roughly 10% profit booked, which annualises near sixty. It does not always go that way. But selling insurance, long-dated and out of the money, contributes quietly and durably; the zero-day-to-expiration circus is fraught with peril.

The third is the leverage dial — the synthetic, or poor man’s, covered call. Instead of buying the stock outright and writing against it, I buy a deep in-the-money LEAP, the modern descendant of Thorp’s warrant, for a fraction of the capital, and sell a nearer-dated call against that. Same exposure as the basic system, more moving parts, a sliver of the cash. When it works the return on invested capital is something to behold. But leverage cuts both ways, and this is not a thing to pick up and start doing on any given Sunday.

The system in action

I am a practitioner, not a theorist, and the internet is full of theorists. So, three real trades then.

The basic system: a LandBridge buy-write. I bought the stock around $60.42 and wrote an in-the-money call at $55, for which I was paid $14.47. That locks in roughly thirty percent annualised if I’m assigned, with a twenty-four percent cushion — the stock has to fall almost a quarter before I lose a dollar. Upside is capped, but that’s the concern of the long term investment portfolios covered in , not an operating business.

The short put: the Fermi position above. A $2.50 strike sold into a stock trading near $5, when the volatility premium was, frankly, absurd. Ten percent returned in fifty-nine days, closed.

The leverage dial: a synthetic covered call where, rather than pay $12,500 to control a hundred shares of a $125 stock, I controlled the same notional for $3,710, sold a call just out of the money against it, and closed both legs a week later for roughly 4.85% on the capital committed. A week. That is the upside of leverage.

How Much Is Needed For Freedom? A $100K Prototype.

Before scaling anything, I ask a small question: what can a single $100,000 of working capital reasonably underwrite, and does it move the needle? If I can earn thirty percent annualised (22% so far in 2026) on $100k, that’s $30,000 and approximately equal to the median annual wage in Europe. Set against a US median wage near $60k, it implies something quietly radical; two hundred thousand dollars of working capital, run this way and if the performance holds, equals/replaces a median income. No guarantees attach to that sentence. But as a thought experiment, it is the entire reason I built the machine.

The free portion ends here.

Below the line, premium members of Machina Capitalis get the rest of this issue: the exact list of names I’m underwriting over the next six months, the full order entry — stock, short strike, and the asking price I’m posting the calls at — the contract counts behind each, the blended math (≈35% downside protection across the book, close to 25% over six months, ~50% annualised if the orders fill), and how I weighted it all between the names.

If you want the order book, it’s one click away. If not, I’ll catch you in the next issue.

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Today I want to talk about what is probably the most overrated options strategy there is: selling put options for income. You’ll have heard people spruik it. It’s not a bad strategy. But it is badly misused, and most of the people selling it to you have never actually run it. They take the idea, package it, and sell it as a newsletter — they don’t post their P&L or their trade list, which tells you everything. I’d rather show you how it works from the seat of someone who does this for a living, and let you judge the difference for yourself.

Nothing here is advice. Everything is subject to loss.

The anatomy, kept simple

There’s a stock trading at a price, and there’s a derivative market where people buy and sell the right to transact that stock at other prices on a future date.

When you sell a put, you’re making a promise: if the stock falls below your strike by expiry, you must buy 100 shares per contract at that strike — even if it goes to zero. In exchange, you’re paid a premium up front. If the stock stays above your strike, the contract expires worthless and you keep the lot. It’s a risk-transfer mechanism. You’re the insurer.

To make it concrete, I pulled up the first ticker that came to mind beginning with “A” — Agnico Eagle. Not a recommendation, I don’t own it. Say it’s trading around $166. Sell the $155 put ~33 days out and collect roughly $5.25. That’s $525 per contract. If the stock sits above $155 at expiry, you keep it: about 3.4% over 33 days, or ~33% annualised.

Sounds wonderful. And you’ll hear the pitch: “If it’s a stock you’d want to own anyway, why not get paid to wait?” There’s logic to that. The problem is the gap between that logic and a practitioner doing this repeatedly, month after month, as an actual income source.

The “quit your job” math

Let’s say someone wants to replace their wage with this. US median wage is about $63,300 a year. At that rate of return you’d need roughly $169,000 of working capital and you’d have to roll about 11 puts a year to pull ~$5.8K a month.

It’s just not realistic to expect that. The trade doesn’t always go your way — you’ll get assigned, you’ll have to buy shares, and that chews working capital. Spreading across enough positions to avoid single-name risk, being right month in and month out — I’ve never seen anyone do it on this tactic alone. Use margin to juice it and you invite the other failure mode: the broker stops you out on their timing, not yours, crystallising losses to keep your equity-to-margin balance in line.

It feels like free money until it doesn’t. Eleven good months and then month twelve hands you an event — stock-specific or market-wide — that sells the position down for more than the premium you banked all year. Your upside was capped at the premium the whole time; your capital was locked the whole time. If a better opportunity showed up mid-stream, you couldn’t always free yourself to take it without booking a loss.

Two philosophies

The Croupier. Sell monthly, close to the money, harvest the most time value. Plan your loss in advance — maybe twice the premium — and if it draws down to there, you close and move on. If it works, you buy back early at ~70% of the profit within a week or two and roll into the next setup. It works on paper. In practice it’s a lot of management, and you have to be right far more often than is realistic. I genuinely don’t know anyone who runs this in isolation and wins consistently.

The insurance writer. This is the Buffett-style version, and the one I actually prefer. The trick is to move out in time — six to twelve months or longer — and down in strike, to a 15–20 delta well below spot. You’re not gambling on next month’s noise. You’re getting paid a reasonable premium to wait to buy something you’d be thrilled to own at a deep discount.

A real trade

Earlier this year I had a name trading around $76. Rather than play the short game, I looked out roughly ten months — about 312 days to expiry — and laddered in. One leg: I sold the $40 put. The premium worked out to a ~12% yield, ~14% annualised if held to expiry.

Why I like it: the stock would have to nearly halve before I’m assigned — and I’d be ecstatic to add at $40. Better still, my true break-even isn’t $40, it’s the strike minus the premium, around $35.20. Factor in the ~4.3% I’m earning on the cash balance at Interactive Brokers and the effective yield nudges toward 18–19%, depending on your bracket and whether you run cash or margin. I left that out of the headline number to keep it clean.

That’s the whole point of the long-dated, low-delta approach: I don’t need the cash sitting there to cover every trade the day I enter it. It sits as a form of leverage on the book. I’ve got a long runway to adjust — roll it, cover it by peeling cash from elsewhere, or close it out for a profit. With Agnico, by contrast, a 5% move and you’re assigned, because you’re playing the short game and praying you can roll.

Year-to-date, my closed short-puts have run at roughly 18% on a full-cash basis — call it ~22% once you add interest. For me, this sits as leverage on the working capital in play in the options book as I don’t need to physically put cash in the deal unless I run these to assignment. As a rough rule of thumb, I like to have the collateral 20% covered which takes the ROI effectively to 89%.

And here’s the part that surprises people: this is the tactic I use least. Not because it’s bad, but because I’ve evolved my process. It’s not time-intensive, it gives me a long runway, and it sits as cheap leverage while I wait for valuations to come to me. Many of these I’ve already bought back inside two months because the profit was there. (There’s one loss in the book too — an IBIT trade where I made a mistake. The good, the bad, and the ugly all get logged.)

So: put selling ain’t put selling. Understand what you’re actually trying to accomplish, and whether one particular tactic will deliver it — consistently and realistically, not just in theory. I’m no theoretician. This is just a practitioner putting real results on the table so you can judge for yourself.

Every trade, every line — capital received, capital deployed, wins and losses — is logged for premium members at Machina Capitalis.

Remember - it ain’t easy. Anyone who says otherwise isn’t really practicing what they preach.

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I’ll catch you in the next one. Take care.

Benjamin

Disclaimer: Nothing in this piece is financial advice. I am not your advisor. Everything discussed is subject to loss, including total loss of capital. Options carry significant risk and are not suitable for all investors. Past performance is not indicative of future results. Do your own research and consult a licensed professional before acting.

I’m proud to be partnering with The Solstice Laboratory — At the cutting edge of Econo-physics.

Ray Dalio’s recent piece “Why I Recommend Being a Macro Long-Short Investor” caught my attention.

I liked the piece and, as much as I believe there’s way too much noise around “Macro” in the financial media, I can’t deny its importance on market capital flows and, by extension, my capital allocation.

Going long-short sounds simple and it does make sense, however it is difficult to apply practically for most individual investors. The reason being: it generally still involves essentially picking winners, only here the idea is applied relatively across companies, assets, sectors or even nations.

For instance: a popular trade idea over the last year has been long Brazil / short US stocks.

The trade performed well up until April, with EWZ up ~51% vs SPX ~16.5% for a net profit of 36% for a long-short trader.

Unfortunately however, the YTD performance now has reversed completely with a net performance of −2%.

Long-short Macro ergo isn’t really applicable to long-term investing for the mere mortals, as overstaying one’s welcome — even by only 2 months here — ended in a loss.

Traditionally, hedge funds targeted sector-specific long-short trades, being long the best in class + short the rest, or weaker companies. An example might include long WPM and short the GDX in the gold sector. Over a long-enough time horizon this particular trade has done well, and provided risk-adjusted outperformance during most gold markets, including Bear & Flat — highlighting the difference in underlying models.

Yet again, here a long-short investor needs to manage their timing, selection and leverage (Many hedge funds use copious leverage which is why they blew up all the time) because over the prior 12 months the quality has underperformed the broad index inside the very same sector by ~20%

This type of pair-trading or arbitrage is typical of long-short, and is why hedge funds were originally known as arbitrageurs.

So what if there was a way to utilise the power of long-short to achieve outsize risk-adjusted returns by going long-short on the same asset?

Enter Ed Thorp and the concept of warrant-hedging which I’ve adapted to call options.

The great Ed Thorp is one of my investing heroes and is a pioneer in quantitative finance — arriving on the scene well before Jim Simons et al — and is considered by many to be the true inventor of options pricing, formula known as the Black-Scholes formula. Ed released his work to Fischer Black and Myron Scholes (after having cleaned up in the derivatives markets for a few years prior).

The idea was to trade instruments on the same stock or asset in such a way to become market-neutral i.e. completely directionally agnostic as to price movement in the underlying and instead benefit from mis-pricing of the derivatives on the asset.

How well did this work? See for yourself.

This type of model has been on my mind a lot recently as today’s stock market volatility & geopolitical setup matches the ‘70s in many ways.

Given Machina Capitalis is a business for me — you might say it’s a 1-man hedge fund — the idea of making 20–30% annualized whilst significantly stripping directional price risk is highly attractive, and will more than suffice for my income needs without requiring a large amount of working capital.

How does it work — The Big Idea

Simple. Ed used a basic system where he went long common stock and sold short convertible securities such as warrants that were overpriced.

He calculated the correct hedging ratio such that a net profit was expected by the expiration date of the warrants whether the price went up, down or sideways.

I’ve adapted this system here in by shorting call options to hedge in profits and/or significantly reduce the downside. Before you dismiss this as ‘just writing covered calls’ there are a few nuances to consider.

Factors such as: the strike placement of the short call, the ratio of long stock : short calls and how this can be adjusted over the life of the trade are — to my knowledge — available nowhere else.

Enough theory — let’s examine a real example of a trade I’m running right now.

Hedged Trade: Abacus Global Management (ABX)

My book will not be run completely delta-neutral like Thorp’s was — meaning I’ll always have some exposure skewed directionally. This is because I don’t want to increase the management needs operationally — I want minimal running requirements + acceptable returns with significant downside protection. My edge is to stick to quality assets I know well; in addition to the quantitative factors, this should provide adequate risk-adjusted returns and so far has done so.

One tool I use frequently to get the best of all worlds is the deep-in-the-money covered call, meaning I buy an asset I like at a discount by simultaneously selling an ITM call option at a ratio of 1:1 (100 common = 1 call option).

ABX was trading at $8.98. I hold a positive long-term view on the stock as discussed with but want to hedge my downside here.

Therefore I executed a buy-write — buying 100 shares + selling 1 call option which expires in Jan ‘27. The trade looks as follows — my first tranche was to trade 15 lots.

The Hedge That Pays Me to Wait

Thorp and Kassouf considered a call option a short-term warrant. Sell one in the money against stock you own, and the basic system reappears — long the common, short the warrant, with a margin built in before the market moves at all. Effectively here’s what happened:

I paid $6.51 for a stock that redeems at $7.50. The ninety-nine-cent spread is locked in the day I put it on. 27.5% downside protection and a 24.8% annualized return on capital is guaranteed if ABX stays above $7.50 which has a probability of 77.2%. If I were so inclined, I could set, forget and check in in January. It pays to keep things simple.

Now let’s walk it through the potential outcomes.

Stock price falls below strike. This is the case the structure was designed for. From $8.98 down to $7.50 — a 16.5% decline — I still collect the full $99; the hedge has not even broken a sweat. Below $7.50 the call expires worthless and I am left holding the common, but at an effective $6.51, so I keep making money until $6.51 and only begin to bleed below there. And even then I am $247 better off at every price than the man who simply bought the stock unhedged. At $6.00 he is down $298; I am down $51. The premium is a constant $2.47-per-share head start that never leaves me.

Stock stays in range. Abacus sits at $8.76 today, already above my strike. If it simply refuses to move — drifts, churns, bores everyone — I am called away at $7.50 and book the full $99. This is the quiet feature of the in-the-money write: inertia is a winning outcome. I do not need the company to do anything. I need it not to collapse, and the market gives me that better than three times in four.

Stock rises more than 11%. Here is the opportunity cost. Everything above $7.50 belongs to the man on the other side of my call. So if Abacus climbs, my gain stops at $99 while the unhedged holder keeps going. The break-even between us is $9.97: below that I do at least as well as he does, above it he pulls ahead. To clear $9.97, Abacus has to rally 11% from where I bought in 6 months or so.

Of course it should be noted that I can always add to either the long or short side depending on price movement. Given call options tend towards zero as expiry approaches, I can adjust my ratio in a price slump by selling more calls at a higher price and buying more shares at a lower price and vice versa.

Adjusting the Ratio

Ed Thorp never held a hedge still. The heart of the basic system was a ratio — so many shares long against so many warrants short — and the ratio was not a number he set once. It was a dial he turned as the stock moved, and the turning itself was where a good part of the money came from. He computed the ratio from the slope of his warrant-stock curve: how much the warrant moved for a dollar move in the common. We have a shorter word for that slope today. We call it delta. Ed was delta-hedging warrants by hand a decade before Black and Scholes gave the number its name.

A covered call has a mix too, and the first thing to understand is that it breathes on its own. My short call’s delta is the slope; my hundred shares are a fixed +100. The net of the two is the position’s true long exposure. I don’t have to adjust it, I can remain fully covered and relax, yet at times it may be worth adjusting.

Delta Table

As Abacus falls, my short call loses its delta, the hedge quietly lets go, and my P/L sensitivity gets longer and longer the common — not because I did anything, but because that is what a call's slope does as it goes out of the money. Most covered-call writers experience this as a problem as they are often stuck in the trade before they can re-write at the moeny, a more experienced trader might simply adjust the mix.

The down-ladder: changing the mix toward the long side.

When the stock falls through my strike, I do two things at once, and they are the same two things Ed did. I add to the long — buy more common at the lower price — and I re-arm the short by rolling (buying the original call now cheaper and re-selling) the call down to a lower strike, where its delta is high again and its premium is fat again. Each new hundred shares funds exactly one more covered call, so I am writing more calls as I descend, but never more than my shares cover.

What the ladder buys me, rung by rung is a lower blended cost basis and a hedge re-established at the new level instead of a dead one stranded up at $7.50. The breakeven walks down the price chart with me.

The up case is the easy one. If Abacus rises instead, the call’s delta climbs back toward 1, my net delta collapses toward zero, and the position caps itself — fully hedged at the top, exactly as designed.

Once again, I never allow my shorts to outnumber my longs, which would leave me exposed to a theoretically infinite loss in the event of a strong rally in the stock price.

I decide before I ever descend how many rungs I will fund and how large each may be, so that a continued decline depletes a planned allocation and never the entire book.

See my piece on the Kelly criterion.

Access My Entire Playbook

This is one position. Behind it sit several more using the same tactic and more still using more advanced tools

My method is portable by design. What I am building is a one-man hedge fund — borderless, digital, run from a laptop and a connection, owing nothing to a postcode. The same structure that pays me to wait on Abacus pays me from Mendoza or a café in Bologna, just as readily as from a desk in Melbourne. The income has no address. That is the freedom the system is actually for.

Premium members get the rest of it: every trade broken down the way this one was, the book updated live as I move it — each roll, each rung, each adjustment as it happens — and chat access to ask me directly. If today’s piece was useful to you, consider joining. And if nothing else, please like and share it — it’s the single biggest help in getting this work in front of the people who’d value it.

I’m leaning towards these ‘hands-off’ trades with 6-12 months expiry more and more recently - leaves more time to read, write and explore places like Puyehue, Chile in the above photo.

Next time I’ll be examining another popular options tactic— selling put options— and providing a post-mortem on some of my most recent, real-life trades.

Until then — all the best!

Benjamin.

Disclaimer

Machina Capitalis is a personal publication produced for informational and educational purposes only. It documents the author’s own opinions, research, and trading activity. Nothing in it constitutes financial, investment, legal, tax, or accounting advice, nor a recommendation, offer, or solicitation to buy, sell, or hold any security, derivative, or other financial instrument.

The author is not a licensed financial adviser, broker, or registered investment professional, and no advisory or fiduciary relationship is created by your reading this publication or holding a subscription to it. Content is general in nature and does not account for your objectives, financial situation, or needs. Before acting on anything discussed here, conduct your own research and consult a licensed professional in your jurisdiction.

Options, margin, and short selling carry substantial risk and are not suitable for every investor. Strategies involving short options or inverse and leveraged instruments can result in losses that exceed the capital initially committed, in some cases without limit. Returns, yields, and annualized figures cited are specific to the author’s positions, timing, and account, are frequently illustrative or estimated, and should not be relied upon. Past performance — the author’s or anyone else’s — is not indicative of and offers no guarantee of future results.

The author holds, and actively trades, positions in many of the securities and instruments mentioned, and those positions may change at any time without notice. Statements about the author’s intended actions are not commitments and may not be acted upon. Prices, figures, and positions referenced were current only as of the time of writing and will have changed.

Information believed reliable at the time of publication may contain errors or omissions, and is not updated for subsequent developments. To the maximum extent permitted by law, the author accepts no liability for any loss arising from reliance on this material. You act on it entirely at your own risk.

This piece is a record of my own trading for educational and illustrative purposes. It is not financial advice, not a recommendation, and not a solicitation to buy or sell any security. I hold the Abacus position described, and I may add to it, reduce it, roll it, or close it at any time without notice. Nothing here accounts for your circumstances, goals, or risk tolerance.

Options carry substantial risk and are not suitable for every investor. A covered call caps your upside and does not protect against loss below your net cost basis; writing calls against shares you do not own is a different and far riskier proposition that I am not describing here. Averaging down into a falling position can compound losses as easily as it lowers a cost basis. You can lose money — including more than you expect — trading these structures.

All prices, figures, and probabilities are as at the dates stated and will have changed by the time you read this. I am a private investor sharing my own process, not a licensed adviser. Do your own work, and consult a licensed financial professional who knows your situation before acting on anything you read here.

1. Review the performance honestly,

2. Lay out the framework I use to size this whole operation

3. For premium members; walk through exactly where the capital is going and what kind of returns it is generating.

Let me start with the numbers, because everything else is downstream of them.

The performance

I began this book with $50,000. Realized profit to date sits at roughly $26,800 — call it a 54% return on that initial capital across the first five months of the year. This past week I deployed close to an additional $50,000 of working capital. The mechanics of that matter: return is return on capital deployed. If I roughly double the capital base, then all else equal I should expect roughly half the headline return rate until those new positions mature and begin throwing off their own profit.

Measured against the total working capital now outlaid rather than the original stake, the book has returned about 22% over almost five months, or somewhere near 44% annualized if the cadence holds. Realized income booked this month was $3,000. That is a handy little digital income stream, and in plenty of places — much of Europe, for instance — it would sit at or above the median annual salary.

*All figures are in USD

Operating Company Vs Investment Portfolio

The distinction between an operating company and an investment portfolio is imperative and dictates things like cash reserves held and tactics used etc. These trades are viewed as inventory. They carry an additional, rather lovely form of downside protection: if I get stuck in any of these positions, they are already assets I know intimately and am happy to own. I can simply kick them across into the long-term portfolio. There is no forced exit on a name I love.

Inside the operating company, my goal is to minimise the working capital, not maximise it. It is a game of minimum threshold. What level of income do I need from this particular source, with a sensible buffer? What return can I safely generate against it? Those two answers determine how much capital I commit.nEverything beyond that, given the choice, I funnel into the long-term investment portfolios: Crassus, the Royalty King portfolio, and the Croupier Collection.

The Framework

Here is the part you can take and apply to your own circumstances. Sit down with your favourite LLM — I have been doing a great deal of this with Claude lately, talking my thinking through and getting it into visual form — and work out what income you actually need. Monthly, semi-annually, annually, whatever frame fits your life. Then ask the harder question: what return can you safely generate? From there you reverse-engineer the working capital required to produce it.

If one is trying to replace their employment salary, the most intuitive way to do it is in days of work. If you are a subcontractor in a white-collar professional services role, one day a week might be worth, say, $500 USD in the Australian market — roughly $4,000 a month. So if you wanted to buy back one day a week, that is your target: replace $4,000 a month from an alternative source. At 2% a month, the capital required falls straight out of the arithmetic ($200k in working capital) . Then you scale it — two days, three days, four — until the line where the job becomes optional.

I am not pretending this is for everyone, and there are no guarantees I can keep this up. I am simply documenting what I have been able to do. The leverage that options and short selling make available is, used carefully, an extra lever to reach a critical mass of capital — the kind that either frees you from a circumstance or quietly takes the cost-of-living pressure off. Whether that is applicable to you is yours to decide.

If you are reading the free edition: the ideas and the formulas above are the part I keep outside the paywall deliberately. Below this line I open the books — the live positions, the mechanics, and the actual returns on the capital I just deployed.

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"It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong."

— George Soros

Today’s piece comes as a result of premium members requesting an exploration into the concepts I use to run my one-man-insurance-company and separate myself from the gamblers.

In it we cover the concepts of a mathematical edge and how to calculate it, as well as the Kelly criterion and its use in calculating the correct position sizing for a trading portfolio.

Do You Have an Edge?

First thing’s first.

Before taking on any trade —especially any binary trade such as credit spreads—the first checkpoint is to ascertain whether or not a profit is to be expected if it were to be made many times in total.

Edge has a precise definition. It is the degree to which your expected return on a bet exceeds what a fair, zero-sum game would offer.

I tend to refer to Expected value (EV) which is the mathematical expression of that edge applied to a specific trade. It is what you calculate when you plug your probabilities and payoffs into the formula. EV is how you measure edge and is calculated thusly:

EV = (p × b) − (q × l)

• p = probability of winning

• b = payoff per dollar risked

• q = probability of losing (1 − p)

• l = fraction of stake lost on a losing trade (binary outcome = 1; options trade residual value = <1)

Real Example From The Vault

GLD Feb27 415/410 Bull P

On 2/2/2026, GLD was trading around $430.

I informed members that I was selling a bull put spread, where I sold put option at the $415 strike and bought put options at the $410 strike in equal amounts, with both contracts expiring on Feb27, 2026. For every 1 spread sold, I received an upfront payment of $108 (my max profit, realized if GLD finished above $415 by expiration) with a potential max loss of $392 (if GLD were to finish below $410 by expiration)

The probability of the trade finishing in max profit was calculated at 78.4% via the Black Scholes formula.

Calculating the EV:

EV = (p × b) − (q × l)

• p = 0.784 (market-implied probability of full profit)

• b = 0.276 (premium collected $108 ÷ max loss $392 — payoff per dollar risked)

• q = 0.216 (1 − p)

• l = 1 (full max loss if breached)

(0.784 × 0.276) − (0.216 × 1) = 0.216 − 0.216 = ~0.00

This makes sense - the options are fairly priced so one should expect a positive nor negative EV.

A VERY important note - The EV for most binary options trades will actually be zero or negative thanks to the market arbitraging away most obvious edges over the years. This assumes a trader lets the trade expire worthless (total loss). The EV can often be flipped positive via certain stop loss rules (shared with premium members) as it significantly reduces the max loss, allowing the trade to be rolled forward maintaining a positive EV.

Putting this into practice let’s return to my trade on GLD above, but change one variable, I set a strict stop loss to 150% of the credit I received upfront for putting on the trade.

Credit received: $108

Max loss (stop): $108 × 1.5 = $162 per contract (vs $392 without stop)

At market-implied p = 0.784, the EV now resembles the following.

(0.784 × 0.276) − (0.216 × 0.413) = 0.216 − 0.089 = EV of $0.127 per dollar risked

On $392 capital at risk: ~$49.68 edge per contract

An edge can also be obtain through various factors and lateral thinking, one of which includes the timing of selling options for credit —as in this example— when implied volatility is higher than the historic norm. This has the effect of increasing the probability of profit and boosting the EV.

Philosophically, edge is repeatable and structural and EV is situational.

If you’ve made it this far, congratulations, you’ve done more than most and moved from the gambler speculator mindset to that of the professional trader.

The question now is: given that I have an edge, how much of my working capital should I risk to maximise profits without blowing up my bankroll?

The Kelly Criterion

That question actually has a quite a answer. It was discovered in 1956 by a Texan researcher named John L. Kelly Jr.

Interesting cat. Rather flamboyant by most accounts. He was working on information theory and noise on telephone lines while working at Bell labs and also studied the performance of gamblers betting on horse races.

If a gambler could determine an edge, Kelly sought to mathematically determine the exact fraction of a bankroll to wager per bet to maximize the long-term bank roll growth while avoiding bankruptcy.

A lesser known fact I love; Kelly also found that the performance of gamblers at the race track worsened in proportion to the “information” they received. Now consider the tsunami of macro-shmacro content the dominates the financial media and consider its value to investor performance..

The formula he discovered is written as:

f* = (bp − q) / b

Applying the formula to my GLD trade above (with stop loss)

• b = payoff per dollar risked = $108 ÷ $162 = 0.667

• p = probability of winning = 0.784 (market-implied)

• q = probability of losing = 0.216

• f* = optimal fraction of bankroll to stake

= (0.667 × 0.784 − 0.216) / 0.667 = 0.460

Full Kelly says 46% of bankroll. Half Kelly: 23%.

Note: this assumes only running one type of trade at a time, repeated many times, and full Kelly requires balls of steel to trust the math.

One also needs to update their bankroll as it grows or shrinks for calculating % allocation. Ie. I seeded Machina in January, 2026 with $50k. Realised profits now make the capital $61,916. Ergo, using full Kelly as above I’d now need calculate 46% of $61.9K, rather than $50K as I would’ve in Jan.

Unfortunately John Kelly died of a stroke on a Manhattan footpath at age 41. He reportedly smoked 6 packs of cigarettes a day and never got to put his Criterion to work.

Enter Ed Thorp

The man who did put Kelly’s theory into practice was Edward O. Thorp - Polymath and a personal hero of mine. Beat the Dealer is the founding document of quantitative finance dressed as a blackjack book. Thorp applied the Kelly criterion to various gambling games and cleaned out casinos. He then started a hedge fund, pioneering warrant hedging, convertible bonds arbitrage in the stock market decades before quant investing had a name. His work has a heavy influence in the way I ran my Machina.

The Purpose Of The Kelly Criterion

Avoiding bankruptcy.

EV tells me whether to take the bet / place the trade.

The Kelly Criterion tells me how much to put behind it.

And Overbetting is much worse than underbetting.

Under-betting in Kelly terms means growing the bankroll more slowly while avoiding ruin.

Over-betting however causes the variance to expand until you cross a critical threshold Kelly’s paper calls f_c, beyond which ruin is mathematically inevitable regardless of your edge

The formula is free. The edge is yours to find. The only question left is whether you will size correctly when you have one, or whether you will do what most traders do — “got a hunch, bet a bunch” and over-bet, then wonder why they blow up.

In the next piece I go deeper into Monte Carlo simulation and how to stress-test the repeatability of an edge across thousands of simulated trades before risking a dollar. If Kelly tells how much to bet, Monte Carlo tells whether your edge survives contact with reality.

Premium members receive full access to every trade I put on inside Machina Capitalis: entry, sizing, stop levels, and the EV calculation behind each position. Everything above, applied in real time.

If this resonated, forward it to someone who still thinks position sizing is a round number they feel comfortable with.

All the best,

— Benjamin

This article draws on “The Kelly Criterion and the Stock Market” by Louis M. Rotando and Edward O. Thorp, published in The American Mathematical Monthly, Vol. 99, No. 10, December 1992.

Kelly, J. L., Jr. (1956). A new interpretation of information rate. Bell System Technical Journal, 35(4), 917–926.

Nothing in this article constitutes investment advice. Position sizing frameworks are tools, not guarantees. The inputs determine the output. The content published in Machina Capitalis is for informational and educational purposes only and does not constitute financial product advice, investment advice, or a recommendation to buy, sell, or hold any financial product or security. The author is not a licensed financial adviser. All information is of a general nature only and has not been prepared with reference to your individual investment objectives, financial situation, or needs.

All trade details, prices, strike levels, premiums, and portfolio data reflect conditions at the time of writing and are subject to change without notice. Past performance and historical return figures are not indicative of, and provide no guarantee of, future performance. Options trading involves a significant risk of loss and is not suitable for all investors. The value of any investment may fall as well as rise, and you may receive back less than you originally invested.

Probability of profit figures are modelled estimates based on prevailing market conditions at time of entry and are not a guarantee of outcome. Maximum profit and maximum risk figures assume positions are held to expiration and do not account for early assignment, liquidity risk, brokerage costs, or other transaction-related costs.

Any projections, forecasts, or forward-looking statements are based on assumptions the author believes to be reasonable at the time of writing and are subject to significant uncertainty. Actual results may differ materially.

Before making any investment decision, readers should conduct their own independent research and due diligence and, where appropriate, seek advice from a qualified financial adviser who can assess their individual circumstances. This publication is not a substitute for professional financial advice.

Don’t forget to grab your ticket to the Rule Symposium below.

Rule Symposium 2026

Machina Capitalis is my personal money machine.

Its purpose is to generate borderless income for me via: systematic options selling and exotic trading strategies. It is to be thought of not as a portfolio but rather as an operating company. It is not a paper portfolio. These are my own positions, my own thinking, and my own risk. I document every trade and share every detail with members in real time.

My skin is in the game.

Performance YTD +56.56%

Nothing here is financial advice — Caveat lector!

I was pleased to receive a message from my good friend yesterday who was thrilled with the results he’s enjoyed trading options and running the Machina Capitalis playbook. He now has his own personal Machina.

He did mention however, that it isn’t the easiest of material to pick up — a sentiment shared by many if not most people when beginning their study of options as a way to make money. Therefore today I attempt an analogy which hopefully makes more intuitive sense to you dear reader so that things ‘click’ a little easier.

I have more than 8 different options tactics I use from time to time but I have to say, this is becoming my favourite as it’s elegantly simple and super profitable!

In a nutshell; I buy stocks I like and immediately sell someone else the right to buy them from me later at an agreed price. They pay me upfront for that right. I keep the cash no matter what happens.

To add some colour; imagine I own a warehouse and buy a fridge from a wholesaler for $100 on the 1st of January 2026, yet I’m nervous about the consumer economy and, whilst I have plenty of capacity to store the fridge, want to keep a certain amount of inventory turn-over sales to meet my income needs and I don’t want to have to discount at fire-sale prices later in the year in order to do so.

Ergo, I put a sticker on it, offering the right (option) to buy the fridge at only $71.43 (you’ll understand why so specific momentarily). To reserve the right to this bargain I ask for an upfront payment of $40.79 and set the expiration date for this offer at August 12, 2026. As such, the buyer of the option has the right to buy the fridge at $71.43 no matter what happens over the next 223 days, however after that the option expires worthless.

Why would someone pay me for this?

Well, the buyer also lives in an uncertain world and might expect the fridge to cost a lot more in the future than today. Perhaps they’re a fridge-speculator and have reason to believe that this particular model will sell for much more than $112.22 ($71.43+$40.79) by August. Or perhaps, the buyer lives in a country with rampant inflation - like a friend of mine, Hernán, who makes and sells doors and gates for wealthy country-clubs in Argentina. During lunch in 2023 he told me that he and his crew had to increase their prices by 7% per month on average in order to keep pace with inflation. Our fridge buyer in this case needs ‘merely’ 1.6% monthly compounded inflation in order to break even on his option.

So then, why would I do this you may ask?

Sticking with such a creative analogy, let’s say that prior to selling fridges I ran a hedge fund and I made my living from (apart from egregious fees) hedging my trades and arbitraging the spread. Here I was not so interested in whether a given stock price might go up or down over a given period but rather wanting to enter trades with a pre-determined buy low-sell higher feature locked in.

Let’s further assume that I apply this approach and to my retailing and explore the outcomes.

If indeed fridge prices rise rapidly and exceed the $112.22 total break even price for the buyer before the expiration date in August, he will no doubt exercise that option and purchase the Fridge at the agreed price of $71.43. In this case, I as the vendor will have made $112.22 in total cash and will wonder why I ever bothered with Wall St given that I just made profits of 20.63% in 223 days or 33.8% annualised, whilst lowering my capital risk by 40% (my breakeven cost after selling the option moves to $59.21) — and I didn’t even have to fight with limited partners over fees and/or redemptions etc!

But what if there’s a fridge-glut or other such circumstance that causes Fridge prices to drift sideways to down over the 223 days?

Well, after the initial contract expires I am free to sell a new option. My breakeven is now effectively $59.21, meaning I can write a ticket for any price above that whereby the same terms will apply as before (I can also change the dates or time to expiry). Theoretically I could continue such a practice, recycling sales on the same asset until such a time when prices eventually rise pass the strike or sale price. One can imagine the potential returns on original capital such a strategy might offer when the tactics are soundly executed.

Alternatively, I could instead choose to buy more fridges at the depressed price levels if I believed they were high-quality assets whose time would come again. Say I buy another fridge in August after expiration at the going rate of sub $72, now I can sell options on 2 fridges at prices that make sense to me and have enough market interest. The reader can ponder the compounding consequences of this for themselves.

*Sidenote; if fridges paid dividends, they would also accrue to me - thus increasing my rate of return.

What’s the risk?

Easy. The price of the fridge goes to zero before I’ve sold enough options on it to recover my capital.

This can be mitigated by selecting quality fridge models whose value I believe I can judge better than the market is pricing and judiciously underwriting my forward-sales-rights (options).

How do I make money from this and why am I’m I talking about fridges?

Substitute the word ‘fridge’ for ‘Landbridge stock’ and change the pricing to the appropriate ratio (i.e from $100 fridge price to LB stock price, today $64.98) and you now have an idea of how I am making the equivalent returns with the same trading tactic.

Whilst the analogy above is preposterous, I promise you it is the main tactic I am running right now with the same equivalent expected returns baked in - only I’m doing this on stocks I love (because it’s difficult to travel with so many fridges!).

Substitute fridge for Landbridge — ($LB) trading today at $64.98 — and you have the exact trade I'm currently running inside Machina Capitalis. The strike price, the premium collected, the breakeven, the annualised return + the full position sizing rationale are waiting for you on the other side, along with equivalent trades for Abacus life & GLXY.

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Don’t forget to grab your ticket to the Rule Symposium below.

Rule Symposium 2026

May 2, 2026

Since inception - Jan 1st 2026 - the portfolio is sitting at a 47.56% total return on capital in combined realized and unrealized gains. Of that, 17% has already been locked in — closed, done, cash in hand. I want to walk through where each position stands and what I’m doing next.

The short version: things are going to plan. The only thing that can derail this is a lack of patience leading to rash trading. I’ll explain what I mean by that and what I’m doing to avoid it.

The Short Book: Reducing Exposure

The vol-harvesting side has been a strong source of capital. The decay thesis has played out well. But with so much potential catalyst for a broad downside re-rating sitting unpriced by the market, I'm starting to feel like the short book's risk profile has shifted.

The market’s current disposition feels almost blasé. And that’s exactly when defined-risk structures start to make more sense than open-ended shorts.

So I’m rotating: closing out some short positions, and replacing them with long put options on the same instruments. Same directional view, but with a hard floor on what I can lose during a sharp, short-lived volatility spike. There are already several examples of this in the portfolio and all of them so far have been extremely profitable in quick time.

Below I review each trade I have that’s live and in-play — line by line, sharing my screen— and talk premium members through what I’m thinking along with new trades I’m making this week.

If you’d like access to this over-the-shoulder view, consider joining the ranks of the premium members today. To give you a taste, here’s a small sample of trades discussed in the video:

Burford Capital

The at-the-money calls I’m long are tracking well. I paid $1.43; they’re now at $1.75. Really pleased with how Burford is progressing. My original plan was to buy the long leg first, then sell short strikes once the stock had recovered and effectively getting better prices on the short leg. That plan is intact. I’m in no hurry as my multi-bagger thesis is intact.

Fermi

A pre-revenue data center company operating out of Texas on what I think is genuinely exceptional land for the use case. IPO'd above $30, got sold down hard as the market digested the reality: they won't sign a tenant for 18–24 months, and until then they're burning cash. But if they do sign — and I believe the asset quality gives them a real shot — the re-rate will be significant. Long-term leases into a high-quality power-generation facility command serious multiples. Bought calls rather than the stock outright. A small, well-structured bet on an optionality-rich situation.

GLD Call Spreads

Gold needs to be above roughly $5,000 spot by end of 2028 for these to land in the money. Small position - multi-bagger in success mode.. Great risk/reward if we get there; not a loss that matters if we don't.

Gold Royalty

When the market sold off in March, I sold the $3-strike call, which was ITM and locked in a 21.3% spread, meaning that was my profit margin the moment I entered the trade. If GROY drops below $3, my effective average entry comes out to around $2.45 and at that level I’d be adding, not worrying.

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Machina Capitalis is my personal money machine.

Its purpose is to generate borderless income for me via: systematic options selling and, on occasion, high-conviction special situation speculations like the one I’m about to walk you through. Nothing here is financial advice.

These are my own positions, my own thinking, and my own risk which I document with members in real time. My skin is in the game.

Caveat lector!

Performance

A brief update: Machina Capitalis is sitting at just under +45% total return on initial capital since inception (Jan 2026). I’m reasonably pleased. The goal is to deploy capital carefully and systematically where the expected value is genuinely compelling. This trade fits that brief.

Trade Setup: Burford Capital?

Let me be direct about something upfront: I don’t like this industry. Litigation finance is a business model I find distasteful.

That said, whether I like it or not, the business exists and it will continue to exist. Right now, IMHO the market is throwing the baby out with the bathwater and as a result the stock is trading at less than half its estimated book value. In these scenarios: betting on a reversion to book value and/or normalising market multiples, I’d rather own the options than the equity. I can collect the upside without having to be a long-term owner of something I find philosophically unappealing and it’s also much more capital efficient. That’s one of the genuine advantages of derivatives.

So what happened, and why does it matter?

The YPF Saga - Overreaction.

Burford had ashare of a ~$16 billion arbitration award against YPF, the Argentine state oil company (Yacimientos Petrolíferos Fiscales), in a case stemming from Argentina’s expropriation of the company. They won. Then they lost on appeal. Now they’re seeking a further hearing.

My view on the appeal: the probability of a meaningful recovery is low. Argentina defaulting on its obligations is practically a national sport at this point (I say that with affection as a ‘new Argie’). However, Burford is not going to extract $16 billion from a sovereign nation that has no real incentive to pay, where neither the US government nor any private entity is going to put geopolitical pressure on Buenos Aires over a litigation claim.

So I’ve written the YPF case to zero. That frees up my mental energy to ask a much more interesting question: what is this company worth without the case?

The Underlying Business

Strip out the YPF noise and you have a business case:

• Book value of ~$5.2 billion, modeled internally by Burford without the YPF award

• Low correlation to markets; litigation outcomes don’t care about the S&P or Fed rate decisions

• Lumpy but high-quality cash flows. Suits resolve on their own timeline, not quarterly earnings cycles

• Historically valued at 1.5x–2.5x book suggesting intrinsic business quality that the market has recognized before

At the time of writing, the stock is hovering around $4.50, giving a market cap of roughly $1 billion against that $5.2 billion book. I’d be buying the business at less than 20 cents on the dollar of stated asset value and that’s after writing the big case to zero.

My base case is a reversion to 1x price-to-book within two years and implies a target of $11–$12 ex growth assumptions. A bull case, where the market awards a more typical 1.5x–2x multiple and book value compounds modestly in the interim, takes the price toward $18–$20.

On the equity alone, that’s a 3-bagger at base and a 5-bagger or more at bull. But I don’t want the equity. I want the options.

Because the logic is; If the thesis is right, why not maximise upside with minimal capital?

The Options Structure: January 2028 LEAPS: Bull Call Spreads

Because this is a binary-ish situation with a multi-year timeline, I’m using January 2028 LEAPS giving me approximately 21 months of runway. In my experience, special situations and re-ratings always take longer than you expect. Time is the engine. Theta is the enemy. So I look further into the future when express a long-side speculation while the inverse is true when selling options (on the short side).

The structure is a bull call spread: buy a call at one strike, sell a call further out of the money. This does two things; it reduces my net premium paid (by capturing the premium on the short call) and it caps my upside at the short strike, which I’m fine with because I’ve set my strikes at levels consistent with my base and bull case targets.

I’m running four different spreads across the options chain: a high-probability, lower-payout spread (breakeven just above current price) to more aggressive spreads targeting $12.50-20. Each is sized differently. This chain is fairly illiquid and I’m using the mid-price between bid-ask, putting buy orders in on the long leg first. I plan to sell the OTM calls (the short leg) as the underlying stock price rises (assuming it does) which effectively means I have even higher potential pay offs than stated with less capital in the trade.

Position Sizing: Kelly and Half-Kelly

I’m running a separate sub-book purely for these special situation speculations. For position sizing, I use the Kelly Criterion, or more conservatively, half-Kelly to optimally size each bet based on probability of success and payout ratio. This keeps me from over-concentrating in any position and ensures that even if I’m wrong on the direction, the losses are survivable.

Total capital at risk across all four spreads: ~$17,000 — assuming all my orders get hit. As of today some have, not all.

Expected Value Summary

Running the numbers across bear, base, and bull cases:

Aggregating probability-weighted payoffs across scenarios, the expected value on capital deployed is approximately 5x and that is using an estimated 23% probability of a complete loss, that is, the stock price goes nowhere or down over the next 645 days - which seems an overestimation to me, but I won’t argue with the computer.

It needs to be understood that the EV is not a guarantee — it’s a mathematical output of probability estimates, which are of course subjective. But it gives you a sense of why the thinking behind the trade.

Base case outcome on total book: ~100% return on the full $100k using less than a fifth of it.

The short-term price action will likely be driven by headlines, and there are a few worth monitoring:

• YPF appeal developments — I assign near-zero probability to a recovery, but the headlines will move the stock either way

• Quarterly earnings (MAY) and book value growth — any evidence the core portfolio is compounding is a positive catalyst

• Broader risk-off rotation — if markets become volatile and investors seek uncorrelated alpha, a business with no macro sensitivity starts to look quite attractive

• There remains the risk of an improbable string of case losses

• Accounting opacity; Internal models are done by BUR. How trustworthy are a bunch of lawyers?

The Bottom Line

A ~$1 billion market cap company sitting on $5.2 billion in estimated book value, with a core litigation finance business that has historically earned 1.5x–2.5x book multiples, in a post-event selloff driven by a binary case I’ve already written to zero.

I don’t want to own the equity. But I’m very happy to own leveraged control over the stock via the options.

Become A Member - Special Offer

If this is the kind of thinking you want access to: special situations, options structures, income plays, and the full position-level transparency, Machina Capitalis is where it’s shared. My birthday is April 21, so I'm running 20% off special offer to celebrate. Use the code below for 20% off your membership forever.

https://www.machinacapitalis.com/23f1c11f

All the best,

Benjamin.

Position initiated: 16 April 2026.

The content published in Machina Capitalis is for informational and entertainment purposes only. Nothing contained herein constitutes financial, investment, legal, or tax advice. All positions and trades discussed reflect the author's personal portfolio and opinions at the time of writing. Past performance is not indicative of future results. Options trading involves significant risk of loss, including the potential loss of the entire amount invested. You should always conduct your own independent research and consult a licensed financial adviser before making any investment decision. The author may hold positions in any securities mentioned at the time of publication.

Quick check-in on the portfolio as of today. Up 39% year to date, the lion’s share of that still coming from the short positions. I want to cover three things in this update:

• The macro backdrop and why I remain short the NASDAQ,

• The vol-harvesting strategy and how it’s tracking,

• A new speculation I’m putting on which I think has a credible 24X return profile by January 2028.

Let’s get into it.

Macro Backdrop: Why I’m Short the NASDAQ

The world is precarious right now. I don’t think that’s a controversial statement.

The QQQ closed at around $585. Structurally, the 200-day moving average remains in an uptrend over the past five years — but zoom in and the picture gets more interesting. The 50-day has already crossed below the 100-day and is heading toward the 200-day. If that completes, you’ve got a death cross and the algo-driven trading systems that monitor these signals will respond with mechanical selling. It has nothing to do with valuation; it’s purely technical. But valuation matters too, and the two are starting to converge.

The fundamental case for a NASDAQ derate is straightforward:

Tech has historically thrived in an environment of low interest rates, low inflation, and cheap energy. That tailwind is increasingly in question. More importantly, the narrative that these are capital-light businesses has quietly died. The hyper-scalers are now spending hundreds of billions per year on data centre capex. They have cash flows but they’re consuming those cash flows in maintenance and growth capex. The market has been pricing them like perpetual compounding machines. That premium, in my view, is at risk.

So I am short the NASDAQ and S&P 500 via conservative instruments — structured so that a 7.5% drop gets me to breakeven and an 8.4% drop maxes out the profit. The payoff profile from there is 2–4X on the capital deployed. With 290 days for that move to play out, I think the odds are attractive.

Premium members are aware of this trade + an identical one on the SPY.

Vol Harvesting: How The Shorts Are Tracking

This is the engine of the portfolio right now, and it continues to perform.

The core idea: Certain publicly traded vehicles are arithmetically guaranteed to decay over time due to volatility drag. The longer the timeframe, the more brutal the decay. If you pull up a 5-year chart on almost any of these instruments, you’ll find most have lost 99–100% of their starting value. I’m harvesting that decay by maintaining short positions.

Current P&L from this strategy: $4,168 in unrealised profit for the year, against a liability of $35,111, or 12% return on capital for the quarter and only $640 in borrowing fees. Borrowing fees are just 1.82% of capital deployed for the quarter — an exceptionally low cost of carry for this type of trade.

One note of caution I’d offer anyone considering this approach: bond ETFs can occasionally resist the decay dynamic even over multi-year periods. I don’t touch them for this reason.

New Speculation: A Potential 24X by January 2028?!

The following section includes the full trade structure, position sizing, and the 24X return thesis and is for premium members only. Paid subscribers also have access to the full Machina Capitalis trade log, updated positions, and the live portfolio dashboard.

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"Too many investors look at the present. The present is already in the price. You have to think out of the box and visualize 18–24 months from now, what the world is going to be and what securities might trade at. If you can see something in two years that's entirely different from the conventional wisdom, that's how you make money."

Stanley Druckenmiller

Performance Update

A volatile week, particularly across the gold complex. Since inception at the start of this year, the portfolio is sitting at a total return of approximately +38% on initial capital. That’s down from the peak of roughly +70% a fortnight ago, which reflects the leverage volatility inherent in the positions rather than any fundamental deterioration.

Oil positions continue to perform well, and the broader portfolio is in good shape. The volatility is concentrated in the gold positions — which is to be expected given the leverage applied. The key distinction: this is mark-to-market noise, not capital loss.

Is the Gold Bull Market Still Intact?

Short answer: yes.

Despite the steep drop seen over the past week, the technical structure remains firmly bullish. Looking at the 50, 100 and 200-day moving averages on gold, three major pullbacks have occurred over the past year and none of them have meaningfully challenged the 200-day moving average.

Around the $4,400 level, support came in decisively. Selling volume spiked, including a $25.67 billion 24-hour volume day in January and $21.5 billion on the 23rd of March and buyers absorbed those flows entirely. That is a strong market.

Price Targets:

I’ve left all profits from five years of gold savings in the position — that’s a free ride at this point. Initial capital has been pulled out and is being redeployed into leveraged vehicles: royalty companies and structured options spreads.

NASDAQ: A Technical and Macro Wreck

The NASDAQ (using QQQ as a proxy) has broken below its 200-day moving average and the move is not looking like a false breakdown. The 50-day moving average is now encroaching on the 100-day from above. If it crosses to the downside which is known as the death cross, algorithmic selling pressure will compound the move materially.

On the macro side: disruptions to traffic through the Strait of Hormuz, if sustained for another one to two weeks, will put the entire economy under pressure. Financials and tech i.e., the NASDAQ are the most exposed. Bond yields are likely to rise. Even gold miners could see near-term revenue impact if production is curtailed.

One silver lining in that scenario: exchanges may be misconstrued as financials and sold off indiscriminately. That would be a gift and an opportunity to add aggressively to the current holdings in the Croupier collection.

Gold Royalties vs. Gold: The Valuation Gap

There’s an interesting and under-appreciated dynamic playing out in royalty companies relative to gold itself. Looking at Groy (Gold Royalty Corp.) as a case study: since its IPO at ~$5, the stock dropped to $3 on post-IPO escrow selling, then to a low of $1.40–$1.50. Since end of 2023, the dollar price is up ~60% — impressive. But measured in gold terms, it’s actually down ~30%.

This is the opportunity. If you believe gold will substantially outperform fiat currency over the coming years (which I do), then royalty companies that have de-rated in gold terms represent a leveraged way to express that view without the operational risks of mining companies.

Masterclass: The In-the-Money Covered Call

Most covered call strategies sell options above the current spot price to generate a discount on entry while capping upside. This week I want to walk through a variation that’s less commonly discussed: the in-the-money (ITM) covered call — where the strike is below the current price. The logic is different and so is the risk profile.

The goal here isn’t maximum upside participation. It’s about locking in a profit spread that’s embedded from day 1 with meaningful downside protection in the event of non-assignment.

Here’s the first tranche of my planned trade I put on two days ago using Gold Royalty (GROY):

By selling the $3.00 call while the stock sits at $3.24, I receive $0.70 in premium. This takes my true cost basis down to $2.54. G-Roy last traded at $2.54 around July 2025 when the gold price was significantly lower than today. I'm effectively paying a July-2025 price for an asset in a considerably more bullish gold environment.

Two outcomes:

Scenario A — GROY above $3.00 at expiry: Option exercised, I sell at $3.00. Locked profit: $2.54 → $3.00, returning 18.1% / 22.4% annualised.

Scenario B — GROY below $3.00: Option expires worthless. I keep the premium and hold shares at an effective cost of $2.54. I’m happy to own more G-Roy at that level, especially relative to a gold price multiples above where it was when the stock last traded there. I can then write another call and collect rent again.

This targets 22.4% annualised on a royalty company with leveraged exposure to an asset I’m structurally bullish on.

Continue Reading

This is where the free portion of the weekly update ends. Premium members get the full trade breakdown on all five positions below, including the Gold options targeting 5x the performance of the metal itself with zero operational risk, the NASDAQ bearish option (targeting ~376% return by year-end), + options on LandBridge and NEXT.

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There is a tension at the heart of holding gold.

It’s been considered true money for millennia:

No counterparty. No credit risk. No dependence on a system that may or may not honour its obligations.

But it does not pay you. (nor is it supposed to, given that ist is money not credit).

This is usually presented as a trade-off; the price of monetary purity. Fiat yields because you are lending it into a system. Gold does not yield because it sits outside one. The two properties are bundled together, and conventional thought juxtaposes the two ideas as mutually exclusive.

I am not certain that is entirely right and with a little lateral thinking, there does exist a way to earn a yield on one’s yellow rock that doesn’t require any relinquishing of control or risk of assignment whatsoever. It was my most successful trade last year, allowing me to earn a cash yield of ~1.5% per annum, received monthly, and at the same time allowed me to fully participate in 100% of the upside run in gold over 2025.

It’s analogous to owning a house on which you receive monthly rent and yet on top of that you also benefit from the capital appreciation. Yet despite the effectiveness of this tactic and the potentially life-changing effects it can bring, I am the only person (to my knowledge) publishing about it.

The disinterest is astounding.

Today the tactic is explored again and for premium members, you’ll discover how I’m using it to generate an expected 15% annualised ‘rent’ on some spare gold holdings without ever being at risk of losing my physical bullion.

The Position

I start with a certain amount of physical gold exposure.

Given I hold bullion, which itself remains untouched; vaulted, unencumbered, and free of counterparty risk.

In search of cash yield and an uncorrelated source of returns, one that will pay off if gold stays flat-down I ask myself the following:

How many option spreads could be sold such that, even in the worst-case scenario — where every spread reaches maximum loss — the combined position remains net positive?

From there, I can logically deduce a the correct entry points and number of credit spreads to sell to create a win-win scenario.

In theory, it translates to approximately:

~1 spread per ~25–30 shares of equivalent exposure, depending on premium and strike selection.

Today I’m showing premium members the exact details, however it is that ratio, not the nominal dollar value, that’s the key. Everything else scales from it.

The Overlay

GLD is simply gold in trust form — a liquid wrapper around the underlying metal, subject only to a modest management fee.

Because it trades publicly, it supports an options market. And because gold attracts persistent speculative interest, that market tends to price implied volatility at a premium to realised volatility.

In other words:

The market routinely overpays for uncertainty.

That is the source of return.

The structure is straightforward:

1. Sell out-of-the-money call spreads against the underlying exposure

2. Size them such that maximum loss is covered by the gain in the physical at the long strike.

This transforms a directional bet, into a cash flowing asset.

The Trade Setup

• Spread: 475 / 485 bear call spread

• Contract size: 100 shares (standard US options)

• Credit: $1.39 or $139 per spread

• Width: $10

• Max loss per spread:

(10−1.39) × 100 = $861

Max loss = $861 per contract

You may notice the expected value (EV) of the trade is negative. So if you blindly copy this you can expect to lose money. The genius is in combining the physical anchor and a roll management secret that flips the EV immensely positive.

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Will oil weaken?
Will tech crash?
Will volatility spike? etc.

In my one-man-insurance Co. my , I run my operations differently.

W…

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He’s not a large man. He’s not particularly strong. But he’s just made an extremely bold claim that stops people mid-conversation: give him a lever long enough and a fulcrum to place it on, and he could move the Earth itself.

Not with more muscle. Not with more effort. With better structure.

The fine folk of Siracusa no doubt laughed. Engineers rarely get the last laugh in their own lifetime, but the principle he was describing has quietly underpinned every meaningful advance in mechanics, architecture, and even capital markets, ever since.

Leverage isn’t about force. It’s about physics. It’s about arranging things so that modest input produces outsized output — not by taking on more risk, not by borrowing against tomorrow, but by finding the fulcrum that changes what’s possible with what you already have.

That’s the idea I want to introduce today. And I want to introduce it through a strategy that most investors never encounter — not because it’s obscure or complicated, but because it sits quietly in the options world, while most people are busy staring at price charts and macro forecasts.

It’s called the Poor Man’s Covered Call (PMCC)

The name is unfortunate. The returns are not.

First, The Machine It Improves On

To appreciate improvement you need to understand the original.

A covered call is one of the most straightforward income strategies in markets. You buy 100 shares of a company. You sell someone else the right to buy those shares from you at a higher price (a call option) and they pay you a premium for that right. If the stock never reaches that price by expiry, the option dies worthless, you keep the premium, and you do it again next week/month/year etc. If the stock does get called away, you sell at a price you agreed to in advance which is still profitable, just capped.

Simple and effective when done right.

However, the main drawback of the covered call is that it can require a lot of working capital, especially for many of the assets that I know and love.

Consider that running a covered call on CME Group right now with the stock sitting at $303 means owning 100 shares at $303 each. So over $30,000, locked in a single position producing perhaps $300–400 a month in premium income.

*The 30 day ATM call on CME is $3.53 mid-bid/ask at time of writing

That’s decent yield. But it’s being extracted from an enormous base, with $30,000 stuck and working at roughly 1% per month. And given CME pays only a modest dividend of ~3.5% the returns from yield alone might not be worth the management time.

For decades the covered call was the tool of choice for many (it still is).

Then options markets matured. And someone with an eye for leverage found the fulcrum.

The Lever

Here’s the insight at the heart of the PMCC, stated plainly:

A deep in-the-money call option with a long expiry behaves almost identically to owning the shares — at a fraction of the cost.

When I buy a deep in-the-money call option with a long expiry, it behaves almost identically to owning the shares but I’m spending a fraction of the cost.

When I position a call option deep enough in the money, it moves nearly dollar-for-dollar with the underlying stock. It tracks price closely because there’s less extrinsic, or time value in it. It carries the same directional exposure and — this is the critical part — I can sell short-dated calls against it, exactly as I would if I held the shares outright.

So instead of spending $30,000 on 100 shares, I spend a fraction of that on a LEAP (Long-term Equity Anticipation Security), essentially a long-dated call option, and use that as my foundation. Then each cycle, I sell a short-dated call against it, collecting the premium or selling for capital gains in the event of assignment and repeat.

The structure I use, distilled:

I buy a deep in-the-money call expiring 12–24 months out. This becomes my synthetic stock position — my lever.

I sell a short-dated out-of-the-money call against it each cycle. This is my rent.

Collect. Reset. Repeat.

No borrowed money. No margin calls. My maximum possible loss is defined the moment I enter being the price I paid for the long call. What I’ve built is a replacement for share ownership using pure structure, with my capital requirement slashed and the fulcrum placed exactly where Archimedes would have wanted it.

The Trades — Real Positions.

This is where it stops being theory.

What follows are some live positions from my own portfolio. Trades I’m actively running and sharing with Machina Capitalis premium members each cycle. The numbers aren’t hypothetical. They’re what the machine is actually producing right now.

CME Group — The Aggressive Configuration

CME is a business I understand and respect: it earns revenue every time a derivative contract changes hands, regardless of market direction. When volatility rises, its income rises. It’s a toll road on financial uncertainty which makes it an excellent foundation for a systematic income strategy IMHO.

The stock is trading at $303 and I have just notified premium members of the trade I entered:

Long: January 2027 $200 call = $10,340

Short: FEB 27 2026 $305 call ~$310 premium collected

Total capital deployed: $10,340 Compared to the $30,300 the share-based equivalent demands today.

The short call sits roughly 9% above the current price (out of the money), giving the stock room to move while the premium lands in the account.

If the short call expires worthless, $310 is collected. That’s 3.0% return on capital in a single week.

The long call remains intact. The position resets. The machine runs again next month.

If CME rallies through $305 and assignment occurs, the spread closesAt expiry, a CME close at or above $305 implies a capped payoff of roughly $1,150 before costs, based on the structure’s defined spread.

Personally I love using this setup.

Estimated returns shown are payoff-diagram projections based on specific expiry assumptions; actual results will vary materially depending on price path, volatility, timing of exit, and execution.

ICE — The Patient Rent Engine

Intercontinental Exchange is trading at $154 today. Yesterday I entered the following trade:

Long: January 2027 $125 call ~$3,710

Short: March 20 2026 $160 call ~$181 premium collected

The short call sits approximately 7% above the current price. The wide gap between the long and short strikes makes assignment unlikely by design. This isn’t a position built to close, it’s built to run. To collect rent on a long-dated asset while that asset quietly compounds in the background.

The result so far: $181 collected, approximately 4.9% return on capital over a 60-day cycle.

Long call intact. Next short sold in April if the March contract expires worthless.

What These Numbers Suggest

A brief pause is warranted here, because these figures deserve honest framing.

Annualized returns of the likes above are not a promise. No strategy produces clockwork results across every market condition, and anyone presenting options income as guaranteed yield is someone to walk away from. The numbers are shown purely to illustrate the capital efficiency of one tactic vs the other.

The traditional CME covered call locks up $30,300 today. This PMCC locks up $10,340. That $20,000 difference doesn’t disappear it remains available, if I so choose, for more trades or investment positions.

Over time, systematic reallocation and repeatable income collection can materially influence results, particularly when applied consistently across multiple market cycles. This approach depends less on prediction and more on structure, patience, and disciplined execution.

A Final Thought

Archimedes never actually moved the Earth. But he understood something that most people in his time didn’t: that the question was never about strength. It was always about position. Find the right fulcrum, apply the lever correctly, and physics does the rest.

That’s what Machina Capitalis is built around. Not predictions. Not hot tips. Not the exhausting performance of appearing to know what markets will do next week.

My machine designed carefully and run consistently, emphasising structured income processes and disciplined execution over market prediction.

The two positions above are live as of February 20th, 2026. The premium members who follow these trades saw the setups before the trades were placed: from the entry logic, the strike selection to the management plan, and the exit criteria. Every cycle, they see the next ones.

The two positions above were live as of February 20th, 2026, with premium members able to follow the full decision process in advance — from structure selection through to management and exit planning.

If this framework has prompted you to consider how repeatable option structures can influence income and capital allocation over time, that line of inquiry is worth exploring to see whether it may be appropriate for you.

The lever exists. The fulcrum is here.

The premium tier is where we place it together.

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Disclaimer: This article is provided for general information and educational purposes only and does not constitute financial advice. Options involve risk and may not be suitable for all investors. Examples shown are from a real portfolio and are not recommendations. Readers should consider their own circumstances and conduct independent research before making any investment decisions.

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The full video breakdown — including sizing, expiries, and risk structure — is available exclusively to paying members below.

Six weeks into 2026, total profit stands at $15,731, representing a 31.5% return on capital — driven by methodical short and options positioning, not leverage, not prediction.

This session is a live walk-through of how I’m actually deploying capital in real markets: no theory, no hindsight, no headline-driven trades.

Importantly, this is not a fully deployed portfolio. A meaningful portion of capital is deliberately held back. The objective is to start from a realistic base and build patiently — allowing structure and duration to do the work rather than forcing exposure.

I break down how I scale into positions slowly using options, why I favour path-dependent ETFs on the short side, and how I think about return on capital when volatility is elevated but direction remains uncertain.

Inside the full video, I go several layers deeper.

I show:

• Exactly how I size and layer positions over time

• The reasoning behind choosing specific expiries, including 2028-dated options

• How I think about NAV versus market price when underwriting multi-year upside

• The risk scenarios that don’t show up in backtests — and how I structure around them

• How I use options not just for income, but as a one-man insurance operation within the portfolio

Disclaimer: This content is for educational purposes only and reflects my personal process. I’m documenting my own process and positioning — this is not a recommendation or financial advice.

Performance and Trades Screenshots

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The approach is straightforward: I sell put options on assets I’d be comfortable owning long term, at prices below where they’re currently trading.

I also use shorter-dated expiries to keep duration short and optionality high, allowing positions to be recycled in what’s known as the ‘Wheel Strategy’

If the option expires, the premium reflects compensation for taking on downside risk. If assigned, the result is ownership at an effective price below the market level at the time the trade was opened.

Below are three examples from my own account, including the strike, expiry, and position size. They’re shared for transparency and illustration only — think of this as a page from my private trading journal.

Let’s take a look.

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In the biblical tradition, abundance only appears once a vessel exists to contain it. The oil multiplies after the jars are prepared. Without the vessel, there is nothing to hold the blessing.

Machina Capitalis begins from that premise.

This video is not about trade ideas, although you will see examples of those, it’s about the engine that can perform the function of generating and tracking performance over time.

What I’m going to walk you through is the framework I use to:

• Organise multiple options strategies inside one system

• Allocate and recycle capital deliberately

• Track income, profits and exposure cleanly

• Evaluate performance at the portfolio level

Most investors skip this step. They chase outcomes before building the machine that produces them.

Premium members will follow me as I go through a section of my own personal portfolio, explaining with real life examples how I enter trades and track performance. You’ll also gain access to a link with an example template ready to be adapted to your purpose and used immediately. You can swipe it, adapt it, and begin building your own engine from day one.

The objective here isn’t excitement. It’s durability.

We begin by building the machine.

Access & Early Adopter Terms

For February only, I’m opening a limited lifetime subscription to Machina Capitalis at $2,997.

This is offered as a reward for early action and early adoption — for those who want to build the machine alongside me from the ground up.

You pay upfront once and gain access forever.

Before subscribing, you must review the eligibility criteria.

This publication is exclusive.

For those who prefer flexibility, an annual subscription is available at $1,997.

Both prices are intentionally set at early-stage levels and are expected to rise over time as the system, content library, and track record expand.

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