Earning Income from IBM Stock with Cash-Secured Puts

International Business Machines (IBM) stock has struggled, losing 18.0% over the past year, while the S&P 500 gained 16.0%. However, investors can still generate income from the stock through an alternative strategy: selling cash-secured put options. By agreeing to buy IBM at $155-30.4% below its current price of $222.64, an investor can earn about 4.1% annually on the set-aside cash.

The trade involves selling one put option on IBM expiring on 9/17/2027, with a strike price of $155. The premium collected is approximately $605 per contract, with each contract covering 100 shares. Investors must set aside $15,500 per contract to cover the potential purchase. If IBM stays above $155 by the expiration date, the put expires, and the investor keeps the premium. If the stock closes below $155, the investor buys 100 shares at around $148.95 each, 33% below the current price.

IBM’s financial performance shows mixed results. Revenue rose to $69.1 billion over the last twelve months, up from $64.0 billion a year earlier, and operating margins have improved from 14.4% three years ago to 18.4% now. Software sales, which account for 44% of revenue, grew 10.6% in fiscal 2025. However, the second quarter of fiscal 2026 saw only a 1% revenue increase, prompting management to lower its software growth forecast for 2026 to a range of 6% to 8%.

Investors should watch IBM’s software sales closely, as they are a key indicator of the company’s health. Full-year 2026 results will provide more clarity on whether delayed deals have closed or been lost. While betting on a single stock carries risk, alternative strategies like selling cash-secured puts offer a way to generate income while waiting for the stock’s direction to become clearer.