How to Make a 1.1% Yield Shorting One-Month Microsoft Puts

Microsoft Corp (MSFT) stock still looks cheap here. One way to play it is to Short cash-secured MSFT puts that expire in one month. That provides a good way to set a lower buy-in and also make a 1.1% one-month yield.

MSFT is trading at $491.54 in midday trading today. That's well off its recent peak of $542.07 on Oct. 28, but just up from a recent low of $472.12 on Nov. 21.

Based on my analysis in my Nov. 4 Barchart article ("Microsoft Produces Strong FCF As Expected - Shorting OTM Puts is an Attractive Play"), MSFT could be worth $682.55 per share. That's based on its strong free cash flow (FCF) and FCF margins.

In that article, I discussed shorting MSFT cash-secured puts that expired on Dec. 5 at the $500.00 strike price. The investor received $7.10 in premium, for a 1.42% one-month yield (i.e., $7.10/$500.00).

Moreover, the breakeven point was $492.90, after receipt of $7.10 in income. That's about where MSFT stock is today. 

This short-put trade can now be repeated.

Shorting Cash-Secured OTM MSFT Puts

For example, the Jan. 9, 2026, expiry period shows that the midpoint premium at the $475.00 put option strike price is $5.63. This strike price is $16.54 below today's trading price - i.e., 3.36% out-of-the-money

That provides an investor who secures $47,500 in cash with their brokerage firm a potential buy-in at $475.00. In return, they receive the $563 in income immediately in their account.

That works out to a short-put yield of 1.185% (i.e., $5.63/$475.00).

This also means that the potential breakeven buy-in is much lower:

  $475.00 - $5.63 = $469.37

That is 4.5% below today's price. In other words, it provides good downside protection along with immediate income.

In fact, over the last 2 months, the investor would have received $12.73 in income ($7.10 last month + $5.63 this month).

That means the total yield has been 2.68% (i.e., $12.73 / $475.00) over the last 2 months, and the net breakeven is now $462.73 ($575-$12.73). That's 5.76% below today's price.

Therefore, as long as MSFT stays roughly in this trading range, it makes sense to short these out-of-the-money (OTM) puts for a long-term investor.

That way, they can make a good income and also set a lower potential buy-in point.

The bottom line is that MSFT stock still looks cheap here. Shorting cash-secured puts in one-month expiry periods provides at least a 1.1% monthly income and sets a lower potential buy-in point.