That’s not the impressive part.

What is impressive is that none of them relied on the stock to go up in order to achieve those returns. The return was set the day each trade was opened.

The Big Idea

Lock in a profit spread upon entering a trade, underwriting an extraordinary risk-adjusted return and hedging the downside all in 1.

The Concept Behind This System

Most investors buy a stock and hope it goes up. In this system, I want to be able to profit no matter which direct the stock goes. Before execution, I calculate the most I can make, and how far the stock can move with the position still being in profit.

I lock in a spread at a price where, if the shares rise and are called away, the return on my capital is still above average. If they fall, I am well protected from loss.

That’s not to say loss is impossible, nor that adjustments won’t be required along the way, but rather I have a wide range of profit-zone and I know all my numbers when I enter the trade.

Every setup has to pass three tests:

It needs a fat downside cushion beneath it.

It needs to return at least 20% a year if I’m assigned.

And it needs to hold up if the market has a bad day, or a bad year.

One tactic I like to use to achieve the above is the In-the-money (ITM) buy-write.

How It Works

The mechanics are super simple. I buy the shares and, at the same time, sell a call option with a strike below the current share price. The buyer of that call pays me a premium up front, and that premium comes straight off what I paid for the shares — thus reducing my breakeven.

3 numbers tell me everything I need to know:

1. My net cost is the share price minus the premium.

2. My downside cushion is the premium as a % of the price, which is how far the stock can fall before I’m out of pocket.

3. My locked spread is the strike minus my net cost. This is the profit I keep if the shares are called away.

Why sell the call in the money?

Because that’s where the premium is richest. A bigger premium means a deeper cushion and hence the overall position becomes much less sensitive to stock price fluctuations. It also flips the usual fear on its head. With an in-the-money call, having my shares called away isn’t the risk. It’s the goal, because that’s when the spread is paid in full.

There is a cost to all this of course. My upside is capped at the strike, hence no matter how far the stock runs, my upside is capped.

Trade review: The ITM Buy-Write in Practice

Between 19 and 21 October 2026 I closed three plays: Uranium Royalty (UROY), LandBridge (LB) and St. Joe (JOE). All three closed in profit, for +$5,301 realised on $43,227 of capital, a 12.3% return, or 34.5% annualised.

Each play was an example of the ITM buy write. By the exit, every stock was trading above the strike of the calls I had sold and had little time premium left. So I bought the calls back and sold the shares for a total profit.

Below is each trade from entry to exit, with the actual fills from Interactive Brokers, after commissions.

1. UROY: +$2,623 on $24,182 (+10.8%)

The largest of the three, run on the basic system for 107 days, 6 July to 21 October.

Entry, 6 July. I bought 8,500 shares at $2.84, for $24,182. Against them I sold 50 Jan’28 2.5 calls at $1.24 and 35 Jan’27 2.5 calls at $0.80. That brought in $9,007 of premium and cut my net cost to $1.79 a share.

• First exit, 21 August. UROY rallied to $4.35. I sold 5,000 shares for a $7,505 gain and bought back the 50 Jan’28 calls at $2.40, a $5,816 loss on that leg. Net, +$1,689.

• Final exit, 19–21 October. I bought back the 35 Jan’27 calls at $1.15 (−$1,229) and sold the last 3,500 shares at $3.48 (+$2,163). Net, +$934.

The calls cost money to unwind when the stock rallied, as they are meant to. They are the price of the premium that lowered my cost basis and cushioned the downside while I held.

2. LB: +$2,092 on $6,801 (+30.8%)

The longest campaign, 253 days from 9 February to 20 October, in three rounds.

Round 1, short puts (different tactic), February to April. I sold one Dec’26 40 put at $4.80, two Dec’26 55 puts at $6.85 and five Dec’26 40 puts at $2.80. I bought all of them back early, by 26 May, and kept $1,434 of the premium.

Round 2, buy-write, 30 March. I bought 100 shares at $68.01 and sold a May’26 40 call at $28.45, for a net cost of $39.56. The shares were called away at $40 on 15 May. Net, +$42.

Round 3, buy-write, 25 June. I bought 100 shares at $60.42 and sold a Feb’27 55 call at $14.47, for a net cost of $45.95. On 19–20 October, with LB at $80.75, I bought the call back at $28.60 (−$1,415) and sold the shares (+$2,031). Net, +$616.

3. JOE: +$586 on $12,244 (+4.8%)

A simple buy-write, held 106 days from 6 July to 20 October.

Entry, 6 July. I bought 200 shares at $61.22, for $12,244, and sold two Dec’26 60 calls at $5.72, collecting $1,144. Net cost, $55.50 a share.

Exit, 19–20 October. JOE was at $67.95, well above the 60 strike. I bought the calls back at $9.50 (−$758) and sold the shares (+$1,344). Net, +$586.

This was the smallest return of the three. Selling an in-the-money call capped the upside from the start; the trade was built to earn the premium, not to ride the stock.

Total Scorecard: 12.3% ROIC or 34.5% annualised

The above statistics IMHO do not fully capture the benefits of this tactic and understate the risk-adjusted returns.

On a risk-adjusted basis, all three trades beat simply holding the stock even though in raw dollars, holding the stock would have made more. This is obviously because all three names rallied. The point of the hedges in this strategy is to provided risk-adjusted income.

Further Explained:

• Less risk per dollar earned. The buy-writes ran at roughly a fifth of the stock’s volatility, so each unit of risk earned more. UROY is the clearest case: the stock fell 29% from its peak while the position barely dipped 3%.

• The upside cost was real. Holding the shares alone would have returned more overall across the same windows (UROY ~21%, LB ~31%, JOE ~14%), but with the full drawdown. That’s the trade you’re making: you give up some upside to get the cushion.

• JOE was barely better than the stock. Its Sharpe was only slightly ahead. That fits the thin 9% cushion. This is due to lower vol premiums in its option chain.

Holding the shares would have made more, but with up to almost 10x the drawdown in some cases. The buy-writes earned more per unit of Vol-risked in any given trade.

When To Use This Tactic?

I like to use it when implied volatility is high and I would be happy to hold the stock for an indefinite period if required. It works particularly well with dividend paying stocks because, as the owner of the underlying shares, I am entitled to the dividends paid for as long as I own the shares.

I don’t use this in my long term investing of course, or with a stock you expect to run hard, or when the time value is too thin to pay for the capital tied up. Naturally the premium received must be sufficient to underwrite a profit of 20%+ per annum in the case of assignment.

Pro section — Week 19–23 October 2026

This is the free half. The Pro Section is where members get full insights into what I’m doing.

As a Pro subscriber you get:

• Every trade. Entries, strikes and limit prices posted in the chat when I place them, not a week later.

• The full weekly book. Every roll, adjustment and close, with the reasoning and true campaign breakevens.

• My upcoming actions

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Briefing Oct 17 2026

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That is wrong.

There’s nothing wrong with covered call writing and from time to time I too make use of it, but since it begins with buying common stock and selling an equal equivalent amount of calls it is erroneous to assume that the basic system used inside Machina is another version of this.

Let’s explore the tenets of the basic system and the distinction shall hopefully become clear.

Selling short (shorting) Overpriced Call Options and hedging with common stock.

This is the basic system in one line. Clearly it is philosophically and procedurally the opposite of covered call writing

Add in the all important ratio at which the options are sold short and hedge by going long the common and it becomes evident this is a different (and superior) strategy altogether.

The astute reader will have noticed the italics in the above bolded tab and naturally ask how to tell whether or not an option is over or underpriced. This is the central focus of today’s paper.

Most people look at an option price and see a number. I look at it and ask: is the market paying more/less than it’s worth?

That question is the whole basic system. Ed Thorp answered it in the 1960s with a chart he called the normal price curve. Once you can picture that curve, you can see which calls are overpriced and hence candidates for short selling.

This is the simplest way I know to explain it.

1. The Price Curve

Every option’s price is made of two parts.

• Intrinsic value is what the call is worth if excercised right now: the stock price minus the strike, or zero if the stock is below the strike.

• Extrinsic value, or time value. This is everything above the intrinsic value. It exists because a stock’s price will change over time hence, an out of the money option today may become in the money 6 months from now and hence this optionality is worth something — The price of time and uncertainty.

Eg: Imagine a $100 call option with 365 days to expiry, at 40% volatility priced in.

Notes:

Along the bottom is the stock price; up the side is the call price. Three lines matter.

• The floor is intrinsic value. A $100 call on a $140 stock is worth at least $40, because I could exercise it today and pocket the difference.

• The ceiling is the stock price itself. No call can ever be worth more than the stock.

• The curve is where call prices actually sit: Theoretically the expected value of all the stock price outcomes multiplied by their chance of occurring.

This is illustrative of how pricing should be made considering changes in stock price. But what about changes in time left to expiry?

2. Time Value

Simply put, the more time left in the life of an option contract the more it is logically worth as there is more time for the call’s strike to be realized.

As expiry gets closer, the curve sinks. At the $100 strike, the same call is worth about $25 with two years left, $17.58 with one year, $8.43 with three months, and nothing at expiry. That sinking is time decay, or Theta, and it speeds up at the end. It’s why Thorp found the short side earns fastest in the final months.

When I sell a call short, that falling curve is profit.

3. How the curve is calculated

Ed Thorp and Sheen Kassouf built their normal price curve from twenty years of real warrant prices. This database gave insight into answering the determining question:

At this stock price, with this much time left, what does a warrant normally sell for?

Thorp later created a formula that did this job and introduced it to Fischer Black in 1967. 6 years later Black and his colleague Myron Scholes had successfully tweaked it to account for interest rates and today that formula is the Black-Scholes formula that every broker in the world runs. It also now means the options are priced much more efficiently (within 365 days — outside of which mis-pricings are more frequently found as my friend mentioned in our recent chat ).

Black Scholes (Or Thorp-Bachelier if you’re a traditionalist like myself) runs on 5 inputs:

1. The stock price

2. The strike

3. The time left

4. The interest rate

5. Implied (Expected) Volatility: how much the stock is expected to move up until expiry.

The first four are facts. Implied Volatility is essentially an opinion. So the fair curve is really the price a call should have if the expected volatility eventually resemble realized vol. Naturally then, a higher implied (expected) vol means a pricier option. This can be exploited when the option is pricing in more volatility than will likely be realized.

4. Spotting an overpriced call

A call sitting above the fair curve costs more than the stock’s real movement justifies. Buyers are overpaying. That’s the call I sell.

Here’s a real one from my book. On 6 October, MIAX (Miami International Holdings) dropped about 10% in a day. Into that fear, I sold short the December 2027 $45 call for $3.24, with the stock at $31.30. That price implied about 48.5% volatility.

The volatility expectations appeared exaggerated. Over the previous year it had moved about 41.7% a year and 41% over the prior 3 months. At 41.7%, the fair price of that call was about $2.38. Hence buyers were paying ~$0.86 a share over the curve, making the calls 36% overpriced in normal terms.

The call appeared rich by any measure. Yet a high implied vol isn’t automatically a good candidate for the basic system.

I check three things to decide whether a call is above the curve:

1. How much the stock actually moves. If implied vol sits above realised vol, the call is rich.

2. Its own history. Implied vol near the top of its 12-month range means it’s likely overpriced.

3. Other strikes and expiries. I sell the richest point on the curve I can find that also satisfies the entry criteria for the basic system.

The Basic System Checklist Pocket Card

• Premium ≥ 6% of strike

• Stock ÷ strike ≤ 1.2 (not too deep in the money?)

• Expiry: <4 years, ideally 12–18 months, soonest expiry that passes (Theta Maxxing)

• Above the fair curve (implied vol above realised vol)

5. Hedging With Common Stock

The system could theoretically be run short-only. And, in fact, in the study conducted by Thorp and Kassouf they compared their general system to only shorting overpriced warrants. Short only returned 22x over 17 years with highly erratic profits. Yet the general (basic) system outperformed it by 2.8x and would’ve saved a number of heart-attacks likely induced by shorting-only. The central point is that high profits do not have to entail high risk so hedging is only sensible IMHO.

Real life eg: If I sold that overpriced MIAX call on its own, I’d be betting MIAX won’t rally past the strike price over the contract’s expiry. That’s a directional bet I don’t need to take.

Ergo I buy the common stock to offset or hedge the calls I sold short. What’s left is the mis-pricing: the extra premium shrinks back toward the fair curve, and then the whole curve sinks to the floor by expiry.

The question then is: how many shares to buy per call sold?

Finding the Optimal Hedging Ratio

Here’s the same MIAX trade at three ratios, using the real data: shares at $31.30, Dec ‘27 $45 calls sold at $3.24.

More Visually:

Best read thusly:

• 1:1 is functionally identical to an OTM covered call. It’s still mostly a bet on the stock: net long 63 shares, so I keep most of the downside.

• 3:1 is closest to Original Thorp. The delta ratio here is about 2.7 calls per 100 shares, so 3:1 is almost neutral. It collects three times the overpayment and makes money from a 31% fall to an 81% rise in MIAX stock price from date of entry. The risk is that a big rally, above about $57, costs money (assuming I don’t change my hedges)

• 2:1 sits in between: a wider upside, a narrower downside.

Model figures at expiry, per 100 shares, before commissions. Selling more than one call per 100 shares means uncovered calls, which need margin and carry theoretically unlimited risk above the upside breakeven.

In brief: The more calls I sell, the more of the mis-pricing I collect, and the less I depend on the stock’s direction. That’s the basic system in one sentence:

I don’t predict the stock, I collect the overpayment.

6. Two ideas for another day

• The hedge doesn’t have to be common. In my Advanced System, a deep in-the-money call stands in for the shares as the hedge. It hugs the floor of the curve, so it behaves like the stock for far less capital.

• Cheap calls flip the system around. A call sitting below the fair curve is cheap, and cheap volatility is something I buy rather than sell. That’s the reverse of everything above, and it deserves its own piece.

Summary

• Every call price is composed of intrinsic value plus time value.

• The fair curve is the price a call should have, given how much the stock really moves.

• A call above the fair curve is overpriced, so I sell it.

• I own the stock against it, so I’m paid for the mis- pricing, not for guessing direction.

Below, I walk through exactly how to do this with premium members.

For 20% of membership visit: https://www.machinacapitalis.com/Lifetimeredemption

Disclaimer: General information only. This piece is educational and reflects my own views and trades. It is not personal financial advice or a recommendation to buy or sell any security or option. It does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you, and speak to a licensed financial adviser before acting.

Disclosure. I hold positions in MIAX, CME and MSTR, including short call options, and may trade them at any time without notice.

Figures. Trade prices are my actual fills. Fair prices, payoffs and breakevens are model estimates based on historical volatility and Black-Scholes pricing; they ignore commissions, margin costs, dividends where noted, taxes and early assignment. Historical volatility does not predict future volatility, and past results are not a guide to future returns.

Risk. Options are complex and can lose money quickly. Selling more calls than you hold shares to cover creates uncovered (naked) call positions with theoretically unlimited loss if the stock rises sharply, and requires a margin account and broker approval. Only trade strategies you fully understand, with money you can afford to lose.

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The result is a wide band of prices where the position makes money. It only loses on a big move, either way, and the premium sets how big that move has to be.

The Basic System

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— From the Vault: ICE PMCC (Feb to Sep 2026)

This Briefing is for Premium members only

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Member Question: Is the basic system just covered call writing?

No it’s not.
One is one-to-one. The other is a ratio. That difference changes everything and this video shows you the difference between …

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A subscriber wrote in last week with a question:

“Isn’t the Basic System just selling deep ITM covered calls? How is that any different from selling puts?”

1/ No, actually. ITM Covered calls is not the basic system but rather a simplified and low maintenance version. Today I run you through both for clarification.

2/ Covered Calls and shorting puts are theoretically and economically almost identical in most environments except covered call writers receive the dividends from the stock they hold as part of the covered calls. The vol and hence pricing between puts and calls can also differ depending on the market.

The Basic System is a modern adaptation of the warrant hedging system that Ed Thorp and Sheen Kassouf laid out in Beat the Market, 1967. Their version shorted overpriced warrants against long stock. They sized the short side in a ratio-mix. Not one-to-one. I have taken the idea and applied it to modern options.

The ITM covered call my subscriber described is not the system. It’s a way to get a lot of the benefit with a fraction of the effort. Yet it’s still a hedge and highly effective, whose best feature is its simplicity and extremely low maintenance required. Let me show you both. In order.

The goal of both is lock in a desired rate of return and make it as close to risk-free as possible.

How is this done?

By understanding and optimizing the mathematical relationship between an asset and its derivative.

Once you understand that relationship, you can hedge a trade by going long the stock and short its derivative or vice-versa. Ed used warrants, I favour options, which is the core of how I apply the Basic System.

Thorp's Basic System

Thorp didn’t hedge one-for-one. He shorted warrants against stock in a ratio, sized to the relationship between the two. He called it the mix. Here’s summary of the tenets listed in 1967 with my notes for modern use in brackets:

“Summary of the basic system

• Identify the listed warrants. (options)

• Limit yourself to warrants expiring in four years (I use 6-24 month options)

• Further limit yourself to warrants whose stock is below 1.2 times exercise price. (Don’t write any more ITM than 20%).

• Only short warrants at or above normal price (harder to do in today’s computerised options market, but putting sell orders at the ask in names with high vol is good enough for me)

• Determine the ratio-mix. If you have no definite view on the stock, size off the slope of the normal-price curve →Ed constructed theoretical normal prices for warrants based off time to expiry and stock/exercise price ratio. I modify things with calls where I give the stock room to run by going OTM and then lower the delta/hedge via selling the calls in a ratio-mix.

• Put it on, hold it toward expiry, adjust the mix opportunistically”

The mix: contracts short per shares long is the entire trade. Get it right and you’re not betting on direction. You’re harvesting a mis-pricing and/or embedded volatility while the position sits close to neutral overall.

Example: AEM. Stock $199. Buy 100 shares (1 call option equivalent) and short 3 of the the March19 ‘27 $300 Strike Calls). Stock/Exercise ratio of ~0.66

That, my friends is the Basic System. A ratio, sized off the relationship and adjusted as the price moves to maintain the stock: exercise ratio. I know, at first it can feel overwhelming, complicated and too much of a hassle.

So here’s the simplified version: The ITM buy-write.

Most people can’t be bothered to size a mix. When simplicity is my main aim I run this instead. I get the spirit of the system without the work: I buy the stock, sell one ITM call against it (still < 1.2 stock / exercise price as per above). 1:1 ratio means set and forget until expiry basically. Fixed.

Let’s use AEM again and examine a simple ITM buy write.

AEM. Stock $199. Buy 100 shares and sell 1 lot of the $195 call strike. Same expiration date.

Pro: it’s simple. The short call sits ITM, so the overall delta is significantly reduced — providing large downside protection. You put the trade on and leave it. No ongoing mix to solve for.

Con: it’s not neutral. Net delta on my one-to-one ITM buy-writes usually sits around +25 to +35. That’s a directional risk, although 75% less sensitive than owning the stock naked. Risk can further be mitigate by restricting trading to solid companies with no debt.

The real comparison was never buy-write vs. short put. It's buy-write vs. the Basic System. Not the same thing. What you give up for the simplicity is the dial that let Thorp size his exposure on purpose, instead of accepting whatever a flat ratio gives.

The verdict

The ITM buy-write is where most start. Hedged. Paid to wait. But it is a fixed, simple version of something sharper. Once understood, the ratio-mix version — which is the real Basic System — is where the edge is.

Update & Commentary

Today is my last day in Italy and my time here has been a dream come true. When I was 16 I won a scholarship to study here for 5 months and couldn’t do anything I wanted to do. I was not going to let this opportunity go to waste; I wrote a long list of everything I’ve ever wanted to see/do here and all the places I wanted to visit and did it all!
This is the power of the Machina. I live my dreams without falling behind financially as I can check in with my phone or laptop anytime.

Inside: every trade as it’s placed, the full playbook, and the sizing logic behind a book that’s up 25.6% YTD. Machina Capitalis is a one-man operating company I run from a briefcase — no employees, no inventory, no fixed address. Just capital, discipline, and a freedom foundation that compounds. Subscribe today using the below for 20% off forever!
https://www.machinacapitalis.com/Lifetimeredemption

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Today’s piece departs from my foundational base of sound, risk-hedged income operations and focuses on the notion of extrapolating from a premise held with high conviction and speculating in highly leveraged, asymmetric payoff opportunities.

Specifically, using intelligent leverage to gain exposure to plays with limited downside and massive upside based on a working axiom. Placing a tiny % of the book’s working capital in places which have the potential to return up to 49x.

Working Axiom: The Price Of Bitcoin Is Between $117,000-$296,000 By The End Of 2028.

To state the obvious— I make no guarantees as I could easily be wrong I’m not trying to convince you to accept that blindly as true, it’s simply a working premise. If you don’t accept it, of course the below trades make no sense for you. Tune in next episode.

I will lay out my logic and then provide the trades in detail. Each trade has a defined downside. Two of which have a max payoff of 49x and one is left uncapped for a technically unlimited upside over the life of the contract.

The Logic Behind The Premise

In brief: The US fiscal situation is the writing on the wall. Interest on the debt is now one of the largest line items in the federal budget and every dollar borrowed to cover that interest bill compounds against itself the following year. There's no politically available path to closing the gap via spending cuts at the scale required.

That leaves one lever: debasement. Real rates will be held below inflation for long enough that the debt shrinks in real terms. The same playbook every over-indebted sovereign has run historically.

Once you accept that premise, the interesting question stops being "should I own an inflation hedge?" and becomes "how much intelligent leverage should I apply to it?" That's a different exercise from investing. This piece is about speculating. It assumes the premise rather than argues for it and asks : given this holds, what's the most efficient way to press it?

Modelling Bitcoin’s Price

Two ways.

1/Cost of production — the same as producing any commodity, yet with BTC the supply curve is literally programmed to adapt to its cost of production making it uniquely suited to model its price.

At time of writing, the midpoint cost of production is $43,536 which does not include the required return rate for miners.

For brevity’s sake, extrapolating the production costs and allowing for miner’s acceptable rate of return post-haling (April 2028) puts the cost of production at circa $117,000-150,000.

*Think about it in terms of the offshore oil services trade where the cost of new vessels was juxtaposed against shipbuilder’s required IRR’s to estimate the necessary day rates needed before new drill ships would be built.

2/ Reverse engineering its network effect — a property that has a mathematical formula known as Metcalfe’s law: The value of a network is equal to the square of the number of network users or V=n^2.

However BTC is an expanding network, not static, so it’s necessary to calculate the growth of that network which follows the V=n^3 cubic power expansion form.

Bottom line. The theoretical value of the network when growth is considered = V=n^6

Cutting to the chase, this suggests a 2028 value of $270,438 —$296,871.

*Theory only - Past numbers no guarantee of future performance and the BTC network relies on user adoption growth.

I’ve written 6 in depth articles on the BTC thesis in . All this is to explain the working premise. If/once accepted, the next logical question is how to position intelligently for maximum upside without the risk of ruin.

The free version ends here.
The trades themselves: strikes, entries, sizing, and full payoff math are for paid subscribers only. Below I share my positioning: 3 trades, each with a known, capped downside. Two have max upsides of 49x. One is left uncapped.

Small slice of capital, asymmetric shot at a decade-defining move.

If you’re convicted on the premise, this is the part that matters.

Limited Offer. Get 20% off your subscription for as long as it’s active.

Use this code: https://www.machinacapitalis.com/Lifetimeredemption

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I’m writing this from a Tuscan Villa which dates back to medieval times when it was used as a carriage stop between towns.

Western Europe is not a bad place in which to base up as the markets in New York don’t open until 3-4pm here local time so you can do what you like with the mornings, lunch extremely well, followed by an Aperativo of course before settling in to check your own personal Machina. The danger is it’s so relaxing and after a Limoncello spritz all of a sudden going long 10 delta calls on exotic trades seems like an excellent idea..

In fact, I mentioned the perils/attractions of such euromaxxing to my good friend only yesterday

Now, enough of my floggery. Whilst in Liguria I made several new trades on the back of Janet Scott Bessent’s move to stabilise long term yields. Full breakdown in below.

The Royalty King

Soaking King Bessent's Feet | Crown Compendium XIV

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…

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2 months ago · 6 likes · The Royalty King

This was the signal I have been waiting for to become more aggressive with certain trades. So without further ado, let me share the trades with you and the rationale and numbers behind each.

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My sincerest thanks to all my subscribers and welcome to the newest arrivals.

A reminder that I am available to answer the questions you may have. At first the content may seem overwhelming and the concepts difficult to grasp, but I assure you this is due to them being far more difficult to explain than to implement.

I have taken great pains to lay the logic and explanations out in the archives, however because the concepts in this publication are unlike any other publication in the Fin-stack space it takes a while for them to sink in. Therefore, again I welcome your questions and input — I want this service to be 5 star like that of the Hotel from which I am writing to you.

To that end, Simon sent me a question,

“How do you approach portfolio allocation during a market downturn?”

Good question. Which presents the perfect opportunity to explain how the Machina is different from, hence separated, from my long term investments. It is an operating company — my 1 man hedge fund — whose purpose is to provide a nearly riskless profit spread locked in at time of entry. This is done using the basic system, with simple hedging techniques explained in the archives at length and results in an almost Market- Neutral portfolio meaning: my profit margin is unaffected whether the market goes up, down, or sideways over the life of the trades.

An Analogy:

• A shoe retailer doesn’t care if a pair sells for $80 or $150 — they’ve priced in a margin at purchase. Volume/turnover then becomes the next revenue driver.

• Machina’s basic system: similar logic applied to the stock market. An assets is bought and an option on the asset is simultaneously sold, locking in a profit AND also lowering the risk instantaneously over the life of the option. This basic system can be tweaked many ways, including to the point where I can still profit even if the stock were to drop 70,80 or 90% from the entry price, thanks to the power of correctly placed hedges; As the stock price drops, the hedges gain in value offsetting a potential loss and preserving the profit margin.

• I underwrite each entry for an acceptable annualized return before the trade goes on — I aim for 25%.

• Key distinction from directional investing: I’m not betting an asset goes up or down. I’m buying assets and selling optionality to protect downside at a margin I’m happy with.

Making It Make Sense: Real Trade Example

Let’s take one of my trades - no theory - real trade, and compare the stock price movements vs the hedged position.

On March 27, 2026, I notified premium members that I was entering into a basic system trade on Gold Royalty Corp - GROY.

The stock price was $3.31, it initially rose 15% then dropped hard by -24% mid June.

This qualifies as the type of downturn to which Simon alluded and most market pundits would have sold and/or been tearing their hair out.

Yet through the intelligent application of hedging, my position reads vastly differently: I bought 8,500 shares at an average cost of $2.26 (spot price minus premium gained from selling the options as hedges). Against that stock I've sold 80 contracts: 50 at the Jan '27 $3 strike and then for further protection, 30 contracts at the Jan '27 $2.50 strike.

Total premium from selling hedges $5,220

Total Capital in the trade $19,210

ROI 27% (~68% Annualised).

To make it a little easier to follow, here’s a simple table:

The Point Of This

This morning I fulfilled a life-long dream to visit L’Accademia in Florence and see the Davide. Having one’s own Machina is one way to realise one’s dreams IMHO. I’m halfway through a dream trip through Italy and the Machina has helped me achieve this and, thanks to its low direcitonal exposure, it really hasn't needed a single check-in since I landed. That's not incidental, it's the point of the business.

The drawbacks?

Hedging risk is not for long term compounding gains. By definition locking in a defined expected margin will cap upside, making multi-baggers impossible.

However, for my tastes, there exists no better business model to generate income that is: risk hedged, requires no staff nor physical inventory, fixed costs such as rent etc, with a flexible timetable that can be run from anywhere in the world.

A margin locked at entry doesn't care whether I'm at my desk in Melbourne or on a train from Venice.

Long term investing can be done alongside this system and I cover that in .

If the trade above made sense to you, consider upgrading today. Premium members get the trade alerts in real time, plus the full portfolio, performance reports and support from me personally.

[Special Offer - UNLOCK: 20% off forever using this code: https://www.machinacapitalis.com/Lifetimeredemption]

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I'm a few days into a month in Italy. Day 1 saw me visit the Colosseum and the Palatine (where Rome was founded) before heading way off the beaten track down south into the Calabrian hills — famous for bandits and kidnappings!

Machina Capitalis is Latin, the language of the legendary Roman empire. It translates to ‘money machine’. I chose the name for this publication because that’s its mission: A record and explanation of of how I actually run a machine that produces money, mechanically, on a schedule, whether I'm in my home office or standing in the Forum.

That’s more than just a metaphor. The premium collected and profits of this portfolio is what’s currently paying for the flights, the rentals, the long dinners. That’s the whole point of building it this way.

Headline Numbers

• Working Capital at risk: $261,443

• YTD realized P&L: $9,499.57

• MTD realized P&L: $1,440.70

• Unrealized profits: $55,871

• Total return on working capital: +27.3% YTD

For those just wanting the pulse: the book is up +27.3% on working capital for the year, with $231K currently used as working capital. Steady, unglamorous, exactly as designed. This is seperate from my long term investing — this is an operating business.

A Note on the figures: The 27.3% is total profit ($65,001.86, realized + unrealized) divided by working capital ($238,194.20). Working capital defined as: Capital at risk net of the non-cash liabilities.

Furthermore, these returns need further explanation lest the reader think they are fully market exposed and thus comparable to any other type of return - they are not and they are not. Almost nothing here is a naked long: it's hedged. Real market exposure runs closer to a quarter of the notional. Same profit against that smaller, real number pushes the risk-adjusted return into triple digits. Both are true — one measures capital used, the other measures risk taken.

Take this real example from the trading book:

UROY: entered at $1.79 net of premium, with the stock closing at $2.82 that day — meaning the position carried 36.5% downside protection before showing a loss. Calls sold fully covered at the $2.50 strike cap profit at that spread: $0.71/share, a ~39.7% return on capital, now essentially locked in with the stock at $4.15.

That’s the mechanic behind a risk-adjusted return: a defined profit band with over a third of the stock’s value cushioning the downside — a fraction of the risk a straight stock position carries for a comparable return.

If you want: the whole book, trade-by-trade, wins and losses, unrestricted chat access where you’ll receive live trade alerts and my thoughts behind my positions — that's inside — Join today using this code for 20% off!
https://www.machinacapitalis.com/Lifetimeredemption

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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

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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.

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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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