Built on discipline, not complexity: inside an ASX equities income strategy

Haydn Froggatt and Zac Brabin have decades of derivatives experience between them and access to almost any strategy in the market. They use two of the simplest structures available, and wrote 202 positions with them last year.

Published by Fairway Capital Management. Based on an interview with co-founders Haydn Froggatt and Zac Brabin.

Two traders, two of the simplest structures in the market

Haydn is a Master Stockbroker who has spent more than 30 years on options desks. Zac is an accredited derivatives adviser with more than a decade of trading experience. At Fairway Capital Management, they run a covered call and a cash-covered put. No leverage, no complexity for its own sake.

“The concept behind the fund was to simplify,” Haydn said.

How the two structures work

A covered call: the Fund owns a stock and sells a call option against it, collecting a premium and giving up gains above the strike price.

A cash-covered put: the Fund sells a put option on a stock it’s happy to own, holding enough cash to buy it if the option is exercised.

“You’re not taking any leverage risk,” Haydn said. Every written put is backed by cash, and every written call by shares the Fund owns. In effect, the Fund is paid a premium to promise it will buy a stock it wanted anyway, ideally below today’s price.

Neither idea is new, and that’s the point. The founders aren’t selling a clever new strategy. They’re selling the discipline to run a simple one properly, month after month.

Why the portfolio looks smaller than it is

The Fund held seven stocks at the start of the financial year and three by the end. That’s not a retreat.

“The three holdings probably mask what we’re doing under the hood a little bit,” Zac said. Over the year the Fund wrote 202 option positions and made 63 equity trades, 59 of them through assignment.

The cycle works like this. Calls get exercised in a rally and the stock is sold. That cash goes back out as new puts on names the managers like. The holding count is just a snapshot of where that cycle happens to be on a given day.

Volatility works for the Fund, not against it

The Fund received net option premium in every month of FY26 (trade-date basis, before transaction costs). It was a busy year for markets. The Reserve Bank cut the cash rate in August 2025, then reversed course with three rate rises between February and May 2026, taking it from 3.60% to 4.35% as inflation moved back above the 2–3% target band. Markets also saw a sharp rotation out of financials and into resources.

Haydn puts the monthly premium down to always having one of two trades available:

A flat market still leaves premium to write. Volatility generally pays more for the same obligation.

“A market that’s got some degree of volatility really suits the approach we take,” he said.

Most equity strategies treat volatility as a cost of doing business. Here, it’s the raw material.

Why so much cash isn’t idle money

At 30 June 2026, around 85% of the Fund’s assets were held in cash. The exchange only asks for part of a put’s exercise value as margin, but the Fund holds the full amount in cash regardless. That cash keeps earning interest while it backs every obligation.

“That cash exposure is actually still earning and still at work,” Zac said.

More importantly, it means the Fund can wait.

“We can sit in cash-covered puts and wait and let the market come down to us before we actually jump in and buy a new stock,” Zac said.

What the strategy gives up

Both founders are upfront about the trade-off: in a market that runs hard, the Fund lags. Selling calls over stock caps the upside, and the stock gets sold at the strike.

Haydn’s example: CBA ran from around $120 to well above $160 through 2024 and 2025. A covered-call writer wouldn’t have captured that move, because the stock would have been called away long before.

The Fund also carries other risks:

Against that, Haydn points to a lower effective entry price. Instead of buying a stock at $20, the Fund might sell a put at $19.50 and receive 50 cents in premium. If the put is exercised, that’s an effective entry price of about $19.

It’s a lower cost base, not lower risk. Below $19 the Fund loses much as a direct buyer would. If the stock rises instead, the Fund keeps only the premium.

The numbers

For the year to 30 June 2026, the Fund returned +8.50% per unit after fees, with distributions reinvested. The S&P/ASX Dividend Opportunities Index returned +7.93% on a total-return basis over the same period. The figures are audited. The Fund charges a 1.5% p.a. management fee and a 20% performance fee on returns above the benchmark. Past performance isn’t a reliable guide to future returns.

Zac credits part of the gap to the mandate. Unlike many index-tracking funds, Fairway isn’t required to hold any sector at a set weighting.

“We identified some sectors in housing and consumer that we needed to be a little bit cautious on,” he said. “Our other benchmarks and funds had to own them.”

Being able to say no to a sector isn’t a skill, it’s a mandate. But it’s a real structural difference, and one reason for the result.

The co-founders were the first money into the Fund and remain invested alongside unitholders.

Where they’re looking next

Haydn describes positioning as reactive to the market rather than built on a fixed view. As at August 2026:

These are the managers’ views as at the interview, not a recommendation on any security.

The bottom line

The Fund has four sources of income: premium from written puts, premium from written calls, interest on cash, and dividends on the shares it holds.

It works a bit like a property owner:

The comparison holds on the downside too. If the market runs hard, the building is sold at the agreed price and the owner misses the rest of the rise. If values fall, the owner still has to buy at the agreed price.

That’s the strategy’s one clear weakness, and the founders say so themselves: in a market that runs up hard and fast, it will lag. Their bet is that markets like that are rarer than volatile ones. The real question isn’t whether Haydn and Zac can pick stocks. It’s whether they price those obligations well and stay disciplined when premiums are thin.

Important information: Fairway Capital Management Fund is available to wholesale investors only. One Funds Services Limited (ACN 615 523 003, AFSL 493421) is the issuer and trustee. This article was prepared by Fairway Capital Management Pty Ltd (ACN 667 645 025), Corporate Authorised Representative (No. 001306029) of Zodiac Securities Pty Ltd (AFSL 398350). It is general information only and does not take into account your objectives, financial situation or needs. Consider whether it is appropriate for you, read the Information Memorandum dated 6 May 2024, and seek licensed advice before investing. Past performance is not a reliable indicator of future performance.