IBM Stock: Earn Income with Cash-Secured Put Options
International Business Machines (IBM) stock has seen an 18.0% decline over the past year, underperforming the S&P 500’s 16.0% gain. However, investors can still benefit from IBM’s stock through an alternative strategy: selling cash-secured put options. This approach allows investors to earn income by agreeing to buy IBM shares at a lower price in the future. Specifically, selling a put option on IBM expiring on 9/17/2027 with a strike price of $155 offers about a 4.1% annual return on the cash set aside. Investors collect around $605 per contract in premium, with each contract covering 100 shares. If IBM remains above $155 by the expiration date, the put expires, and the investor keeps the premium. If IBM falls below $155, the investor buys the shares at a discounted price.
IBM’s financial performance has shown improvement, with revenue rising from $64.0 billion to $69.1 billion over the last twelve months. The company’s operating margin has also increased, reaching 18.4% recently. Software remains a key driver, accounting for 44% of IBM’s revenue in fiscal 2025. However, IBM’s second quarter of fiscal 2026 was weaker than expected, with revenue growth slowing to just 1%. Management attributed this to delayed large deals and shifts in client spending.
Looking ahead, IBM’s software sales growth has slowed, prompting management to lower its forecast for fiscal 2026 to a range of 6% to 8%. The company hopes that recent delays in deals are temporary and that clients will return. Investors will gain more clarity when IBM reports its full-year 2026 results. The decision to act on IBM depends on whether investors would be willing to own the stock at the lower strike price of $155, with software sales being a critical factor to watch.
While this strategy offers a way to generate income from IBM’s stock, it is important to note that betting on a single stock carries risks. For those seeking a more diversified approach, the Trefis High Quality (HQ) Portfolio has outperformed major indices without the concentrated risk of individual stock picking.