Get paid a handsome income now for simply agreeing to buy this tech giant later, at a price well below today’s, and you keep that income no matter what the stock does.
International Business Machines (IBM) has had a rough go, with shares tumbling after its latest quarterly report fell short of expectations and triggered a guidance cut. But for investors who see long-term value in the tech stalwart, that drop creates an interesting setup: a way to get paid a healthy income stream right now for simply agreeing to buy the stock later, at a price well below even today’s bruised level. The specifics of that trade are laid out below.
12% annualized yield at a 30% margin of safety, by selling put options.
- Sell a put option on IBM expiring 6/17/2027, with a strike price of $150.
- Collect roughly $930 in premium per contract (each contract covers 100 shares).
- That works out to about 7.0% annualized on the $15,000 of cash you set aside to secure the trade.
- Park that cash in a money market or savings account earning roughly 5.0%, and your total yield climbs to about 12.0%.
- And if IBM falls below $150, you buy it at $150, an effective entry near $140.70 a share after the premium, about a 35% discount to today’s $216.28.
Two Ways This Plays Out, Both Pay You
If IBM stays above $150 through 6/17/2027, the put expires worthless, and you simply keep the full $930 premium. That is about 6.2% on the $15,000 you set aside over 325 days, while that same collateral keeps earning the ~5.0% money-market yield on top, for the ~12.0% total above. You never buy the stock and keep the income, free to do it again.
If IBM closes below $150, you are assigned and buy 100 shares at $150. The $930 premium you already pocketed lowers your effective cost to about $140.70 a share, roughly a 35% discount to today’s price, though if the stock has fallen further by then you would be holding a paper loss.
So what happens if IBM really does close below $150, and you are the one buying? Then everything rests on a single question.
What You Would Actually Be Buying
Because this strategy could leave you owning the shares, the real question is whether you’d be comfortable holding IBM in your portfolio. The bull case starts with management’s explanation for the recent stumble. They argue the second quarter performance, which “fell short of expectations,” was a timing issue, not a structural one. A handful of “tens of large deals failed to close on the time lines we expected,” as clients suddenly redirected capital to other infrastructure. The reassuring follow-up? Management was “very pleased to see that about 1/3 of those have already closed” just a few weeks into the new quarter, suggesting demand was deferred, not destroyed.
Backing this up is the stability of the company’s core. While the transactional business took a hit, management points out that “About 80% of our annual software revenue is recurring,” and this segment “grew nicely in the quarter.” Meanwhile, other parts of the business are showing real strength. The z17 mainframe is having the “best refresh cycle in reported history,” and the Distributed Infrastructure unit ended the quarter with its “highest on record” backlog of approximately $500 million.
Skeptics, however, see more than just a temporary blip. The shortfall was significant enough to force the company to lower its full-year revenue growth forecast to a range of “4% to 5%,” down from a prior guide of “5-plus percent.” That implies not all of that deferred business is expected to come roaring back. The weakness was also concentrated in crucial areas, with transaction processing revenue declining 9% and overall Infrastructure revenue down 7%. For investors weighing how long IBM stock could stay underwater, the debate over this quarter’s results is central.
This gets to the heart of the risk: what if the client spending shift is permanent? The company says customers prioritized other hardware to get ahead of price increases. The bearish interpretation is that enterprises are structurally reallocating their IT budgets toward other vendors’ AI-related gear, potentially eroding IBM’s long-term wallet share. This trade pays you to wait and see who is right, all while giving you a substantial cushion. The one thing to watch is the full-year software guidance of 6% to 8% growth. Hitting the high end would validate the “deferred, not destroyed” thesis; landing at the low end would suggest the bears have a point.
Wondering whether another stock offers a better yield, or what this same trade would pay on a name you already like? You can screen the latest cash-secured put yields across the market for yourself. And if it is exposure to technology as a whole you want rather than this one name, a technology ETF like XLK covers that single sector. Going broader than any one sector, to a quality-first mix across the whole market, is where the portfolio below comes in.
Income Trades Work Best On A Solid Base
The appeal here is real: you get paid now, and you only buy the stock if it comes to you at a discount. But the income from one put is still tied to the fate of one company, and a single bad outcome can swamp several good ones. The trade is the spice, not the meal.
The Trefis High Quality (HQ) Portfolio is built to be the meal: roughly 30 high-quality, cash-generative names, judged on the full picture of their fundamentals rather than one options setup, and re-balanced as conditions change. It carries a track record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. Keep collecting premium on the side, with a diversified core doing the heavy lifting.
