Core Principle — Independence from Market Irrationality

1) Value Realization Happens Up Front

Writing deep in-the-money (DITM) covered calls or cash-secured puts converts position value to cash at trade open. Higher future prices don’t add to this cycle — the cash has already been released and redeployed. Execution focuses on cash-flow certainty, not price hope.

2) Detachment from Short-Run Noise

Short-term prices are driven by greed & fear. We sidestep this by monetizing time value and volatility decay, then redeploying capital on our schedule. Performance becomes a function of structure and process, not sentiment.

• Cash first, thesis second — realize now, stay anchored to fundamentals.
• Rolling extraction cadence — repeatable cycles over prediction.
• Risk control — selection, sizing, and collateral discipline.

Key Edge — High-Delta Advantage & Fast Premium Deterioration

Deep ITM calls exhibit high delta (≈ 0.85–0.95). When the underlying dips, the option’s value (mostly intrinsic) shrinks rapidly. Because extrinsic is already small, the total option price collapses fast — a seller’s edge we call the Delta-Compression Effect.

Execution — Capital Extraction → Float → Redeploy

1. Select fundamentally strong names/screens for DITM structures.
2. Extract via DITM covered call / cash-secured put to realize cash immediately.
3. Park float in T-Bills/money market (risk-free) or next extraction setups.
4. Monitor delta & premium; on pullbacks, buy-to-close early to speed velocity.
5. Repeat on a cadence; track monthly yield, float utilization, cycle time.

Efficiency Rule — When to Apply and When to Avoid the Method

The Capital Extraction Method is the process of creating and redeploying capital at high speed. It performs best when your strike price is far below the current market price, releasing most of the position’s intrinsic value as cash while keeping only a small locked portion. In these situations the trader can record a deferred loss on paper yet immediately reuse the released float to recoup that loss through continuous monthly income (short-term covered calls, secured cash puts, or other high-velocity cycles).

The method becomes inefficient when used on blue-chip companies that trade near fair value. Extracting capital once and redeploying it into another blue chip typically yields only 3–6 % on locked capital and slows float velocity. Even if such names deliver 15–20 % annual returns, their low volatility and limited drawdowns prevent meaningful premium decay or re-entry opportunities.