“Mike, I get the theory. But my account isn’t huge. Is it really worth applying this system until I’ve built up more?”
It’s a fair question.
Here’s what your “small” account can realistically deliver:
$25k account: $250-$400 a month. That can cover the utility bill.
$50k account: $450–$700 a month. Now you’re funding real household expenses.
$100k account: $900–$1,400 per month. We’re talking cash flow.
The exact same rules that work on $25k scale to $250k, $500k, and even $1M.
The only difference is the size of the paycheck.
Yes, the dollars are smaller at the beginning.
But they’re real, they grow, and every trade is building the discipline that protects and grows wealth when the stakes are higher.
In this issue, I’ll walk you through exactly how it works - starting with what to do on Day 1
→ You’ll see the rules to follow
→ The guardrails that keep you safe
→ Real stock examples that fit a $25k, $50k or $100k account
By the end, you’ll know exactly how to place your first trade and how to scale from there.
First, Acknowledge Why We’re Here: The Brittle Playbook
Before we build, we need to be crystal clear on what we're building against.
We were all taught the same formula: work hard, build a portfolio, and then, in retirement, sell pieces of it each year to cover living expenses.
But here’s the problem: selling assets to fund your life makes you vulnerable to bad timing.
If the market takes a 20–30% hit in your first few years of retirement, and you’re also pulling out money to live on, you’re draining your account twice - once from withdrawals and once from market losses.
This can shorten the lifespan of your portfolio, and that’s exactly why so many people feel uneasy.
On paper, you might seem to have enough, but everyone's thinking, what if the timing doesn't work in their favor? Then the money might not last as long as they need it to.
This approach turns the problem around.
Now, the goal isn’t to sell down your assets to go to Walmart; it’s to use them to further generate cash flow for you — dividends, option premiums, and interest. An income you can live on without having to sell the principal.
Because when you stop relying on sales and start relying on cash flow, the fear of “running out” begins to fade.
So if selling assets isn’t the answer, what is?
You build a portfolio that pays you directly - with three parts.
Step 1: The Core Components, Validated by Process
If I were starting from scratch today, my first three moves would be simple.
1. A Bedrock Dividend Grower
This is your foundation - a company with decades of steady dividend increases, predictable cash flow, and a business that holds up in recessions.
Think of consumer staples, conservative insurers, or global logistics firms.
The key here is stability and low volatility.
2. A High-Yield Cash Engine
This is your income booster. These are businesses designed to pay out a larger share of profits directly to shareholders - often monthly. Examples include business development companies (BDCs) and high-quality real estate investment trusts (REITs).
For a smaller account, you want names that trade in the $30–70/share range so you can buy in round lots.
3. Reserve Capital (T-Bills & Cash)
This is the buffer that keeps you safe. Parking part of your portfolio in short-term Treasuries or a money market fund earns you ~5% risk-free, while also giving you the flexibility to handle assignments or sell more puts without ever touching margin.
These three pieces enable you to start generating cash flow right away.
Down the line, I’ll model this out with specific tickers and percentages for $25k, $50k and $100k accounts.
This is where we leave the world of passive investing behind.
Step 2: Installing the Income Accelerator – The Three Levers of a Professional Trade
When we want to own a dividend grower or a high-yield REIT, we don’t just buy it at the market price.
The smarter way is to get paid while waiting to buy it cheaper.
We do this by selling Cash-Secured Puts (CSPs).
Here’s what happens when you sell a CSP:
You immediately collect premium — cash that’s yours no matter what happens next with the trade.
If the stock never drops to your strike, you just keep the premium and move on.
If it does drop and you’re assigned, you buy the stock at that lower price, and you still keep the premium, reducing your effective cost.
Either outcome is a win.
You’re either paid to wait or paid to enter a position at a discount.
But this only works if you structure the trade professionally.
That means following the rules.
Here are the three levers you must master:
Lever 1: The Expiration Date (30–45 Days)
Options lose value fastest in the last 30–45 days before expiration. That’s the best window to operate in, because it gives us steady premium decay working in our favor.
Lever 2: The Strike Price (Delta ~0.30)
Delta gives you a quick probability guide. A put with Delta ~0.30 has about a 70% chance of expiring worthless, which means you keep the premium and never buy the stock. If you’re assigned, you’ve bought a stock you already wanted at a lower price.
Lever 3: The Premium (1–2% Monthly Target)
Each trade must meet a simple benchmark: the premium should equal at least 1% of the cash you’re setting aside. This rule filters out weak trades and keeps your income compounding.
Example Trade to Illustrate
Suppose a dividend grower like KO is trading at $67.
→ You look at puts 30–45 days out.
→ The $65 strike has Delta ~0.30.
→ The premium is $0.85 ($85 per contract).
Cash set aside = $6,500.
Premium = $85.
Return = 1.3% for the month.
Two possible outcomes:
KO stays above $65 → you keep the $85 and move on.
KO drops below $65 → you buy 100 shares at $65, and you keep the $85, lowering your cost basis to $64.15.
Either way, you’ve followed the rules and put the system to work.
This is also why entering through cash-secured puts (CSPs) is so powerful.
🔷 Round-Lot Rule: Creating Covered-Call Surfaces
Every 100 shares you own creates a “covered-call surface” you can rent out for extra income. That’s why account size and stock price matter.
$25k account: 1–2 positions in the $40–120 range.
$50k account: 3–4 positions across multiple sectors.
$100k account: 6–8 positions spread across Bedrock and High-Yield names, each creating new covered-call surfaces while still keeping a healthy reserve.
When a CSP assigns you shares, you’re not just buying stock at a discount - you’re instantly creating a new surface to sell covered calls against.
That means:
You keep the CSP premium.
You collect the stock’s dividend.
You sell covered calls for even more income.
One disciplined entry gives you three streams of cash flow.
The system multiplies income without ever selling your principal.
Quick Illustration
→ You sell a cash-secured put on a $50 dividend stock and collect $120 in premium. The option assigns, so you now own 100 shares at $50 ($5,000 total).
→ As a shareholder, you receive a 3% annual dividend - about $150 a year ($12.50 per month).
→ You immediately start selling covered calls on those 100 shares. Each month, you collect, on average, $100–150 in premium. Over 12 cycles, that’s $1,200–1,800 annually.
Year 1 cash flow from this one position:
$120 (CSP premium at entry) + $150 (dividends) + $1,200–1,800 (12 covered call cycles) = $1,470–2,070 total income on $5,000 invested (≈ 29–41% cash-on-cash return).
And remember - the stock is still in your account. The principal is untouched.
🔧 CSP Guardrails
These are non-negotiable risk controls.
They matter most when your account is smaller, because one oversized mistake can set you back years.
Max obligation per single CSP = ≤ 20% of your total portfolio.
In practice, options trade in 100-share blocks. Most high-quality dividend payers and REITs trade between $30–70 a share, which means each contract ties up $3,000–7,000.
For a $25k+ account, this rule is very workable - $3k–5k per CSP fits neatly within the 20% threshold.For smaller accounts, a single CSP will naturally exceed the 20% limit. That’s not a violation of the system - it’s just a function of position sizing at the start.
The way you stay safe is by:
Running only one CSP at a time until your capital grows.
Keeping at least 20% of your portfolio in T-Bills/cash as a buffer.
The guardrail still applies. Once you’re above $25k, you can spread risk across multiple CSPs while staying inside the 20% limit per trade.
Max combined obligations of all CSPs = ≤ 40% of your total portfolio.
This guardrail is designed to prevent over-commitment across multiple trades.
Once your account is $25k or larger, it’s practical to run two or three CSPs at the same time while still staying under the 40% threshold.
In smaller accounts, a single CSP often consumes 30–40% of capital by itself. That’s acceptable at the beginning - but it means the safe approach is to run only one CSP at a time and leave the rest in reserve capital.
Always keep ≥ 20% of your portfolio in cash/T-Bills.
Always keep at least 20% of your portfolio in cash or T-Bills.
This reserve isn’t idle money. At today’s rates, it earns ~5% risk-free while also sitting ready to cover assignments or fund new CSPs.
Most importantly, it’s what prevents you from ever feeling “trapped” when a trade moves against you. The reserve is what makes the system fundamentally defensive.It gives you flexibility, breathing room, and the confidence to keep executing the process no matter what the market throws at you.
Now let’s put all the rules together and see how they translate into a working portfolio.
Portfolio Blueprints for Different Account Sizes
$25,000 Account
With $25k, you can balance 2–3 Bedrock names, 2–3 High-Yield engines, and a healthy reserve for CSPs.
Cash Flow Projection: ≈ $250–350/month, spikes toward $400 in volatile markets.
You’re not funding retirement, but every cycle builds confidence, discipline, and your account further.
$50,000 Account
At $50k, the Multiplier framework becomes a full-fledged engine. You now run 3–4 Bedrock names, multiple high-yield streams, and a robust reserve for options.
Cash Flow Projection: ≈ $450–$700 when volatility is strong.
At this stage, your portfolio is paying for groceries, transportation, or even a car payment. It feels less like an experiment and more like a system you can trust.
$100,000 Account
At $100k, the system produces mortgage-level cash flow. With 5–6 Bedrock names, a diversified high-yield sleeve, and a large reserve, you’re effectively running a compact institutional playbook.
Cash Flow Projection: ≈ $900–1,400, depending on volatility.
You’ve moved from covering incidental bills to funding major expenses.
The system is generating cash flow - without touching principal.
In these examples, I’ve kept the focus on structure, not stock-picking. But each week, I run the VADER screen across thousands of names and send out my TradeSheets with concrete tickers and option setups that fit these exact rules.
📌 How to Use the Blueprints in Real Life
These blueprints are templates, not prescriptions.
They show what the system can look like at different account sizes.
But nobody is starting from zero. You already own some stocks, ETFs, or cash - the key is to map what you have and fill in the gaps.
Step 1: Slot What You Already Own
→ Dividend Bedrock → Stable dividend growers you already hold (KO, JNJ, PG, VZ, etc.).
→ High-Yield Engine → REITs, BDCs, or other high-yield names (MAIN, ARCC, O, etc.).
→ Reserve Capital → Cash, T-Bills, CDs, money markets — anything liquid and safe.
Step 2: Identify What’s Missing
Ask yourself:
Do I have too much Bedrock (lots of low-yield blue-chips, but weak cash flow)? Do I have too much High-Yield (income is high, but risk feels uncomfortable)?
Do I have too little Reserve (no buffer for CSPs or downturns)?
Step 3: Adjust Position Sizes
→ If one position dominates (e.g. KO = 30% of a $25k account), that’s fine at first. Don’t panic-sell. As the account grows, you’ll naturally balance with new names.
→ If a sleeve is empty (e.g., no High-Yield), start by adding one dependable name like ARCC or MAIN.
→ If you’re overexposed to High-Yield (e.g., 50%+ in REITs/BDCs), redirect new contributions into Bedrock or Reserve until balance returns.
Step 4: Real-Life Scenarios
Scenario A: “I already own KO and O.”
KO = Bedrock; O = High-Yield (monthly payer REIT).
Add Reserve (T-Bills), then consider a second High-Yield (ARCC) to balance cash flow.
Scenario B: “Most of my money is in cash.”
That’s your Reserve sleeve. Add one Bedrock (KO, AFL, or STAG) and one High-Yield (MAIN or ARCC) to start the income cycle.
Scenario C: “I already own several dividend aristocrats, but no High-Yield.”
Slot them all into Bedrock; Add 1–2 High-Yield names to increase monthly cash flow without selling what you own.
Scenario D: “I have too much of one stock.”
If you like it (KO, JNJ), keep it — just add new positions in other sleeves to balance. If it’s not a fit for any sleeve, consider trimming gradually, but no rush.
Step 5: Optional Holdings
ETFs & Funds: Dividend ETFs like SCHD or VYM can sit in your Bedrock sleeve, but remember that options only unlock once you hold 100 shares - so size them with that in mind.
Growth Stocks: Keep them small. They’re not part of the income machine, but they can absolutely live as a “Growth Satellite.”
You don’t need to copy the blueprints line by line.
Instead:
Slot your current holdings into the three sleeves.
Identify what’s missing.
Add or adjust gradually.
Let the system shape itself as your account grows.
Your First 30 Days in the System
Crucial First Step: Paper Trade.
Before you commit a single dollar of real capital, open a paper trading account with your broker. It’s a free, zero-risk simulator. Your mission is to execute this 30-day plan at least twice in the paper account until the steps are automatic.
This is how professionals build expertise without paying tuition to the market.
Day 1–2: → Choose one bedrock ticker from the candidates list.
Confirm its price fits the Round-Lot Rule for your account size.
Park your idle capital in a money market fund or T-Bills so it's earning interest from day one.
Day 3: → Sell 1 Cash-Secured Put on your chosen ticker using the three levers: 30–45 DTE, ~0.30 Delta, ≥1% Return on Cash. Immediately after the trade is filled, place a GTC (Good 'Til Canceled) order to buy-to-close at 50% of the premium collected. This automates taking profits.
Day 4–29 → Monitor. If your 50% profit target is hit, the GTC order will close the trade. You are now free to resell another CSP. If the trade is still open with less than 21 days to expiration (21 DTE), you will "roll" it out to the next month to collect more premium and give yourself more time. Avoid holding options through earnings announcements.
If Assigned → Congratulations, you are now a shareholder.
You now own 100 shares of a great company at a discount.
Your immediate next step is to sell a Covered Call against those shares using the same three levers: 30–45 DTE, ~0.30 Delta, ≥1% Return on Cash.
Manage this new position, being mindful of the ex-dividend date to avoid early assignment.
So, This Is the System
As your capital grows, nothing about the playbook changes.
The same rules, the same cycle, the same guardrails - just scaled up with more positions and bigger numbers.
The discipline you build with paper trades or a $25k account is the exact same discipline you’ll use when managing $50k, $100k, or more.
That’s the point: it’s one professional-grade process that works at every level.
You can practice it, repeat, and get better over time.
But it’s not just about income today - it’s building a skill you’ll use to manage your money with confidence for the rest of your life.
Thank you for tuning in today and for your support of this project!
Mike Thornton, Ph.D.
Great, detailed, simple. Many thanks.