Microsoft shares are moving within a set range – Selling out-of-the-money put options proves effective

MSFT Stock: Recent Performance and Options Strategy

Over the past two months, Microsoft Corporation (MSFT) shares have been moving within a relatively narrow price band. One of the most effective strategies during this period has been selling out-of-the-money (OTM) put options. Currently, investors can earn a 1.5% yield by selling a one-month put option that is 4% below the current stock price.

As of Friday morning, January 9, MSFT was trading at $475.35. This marks a decline from $492.02 a month earlier on December 9, and from $496.82 on November 7.

Related Updates from Barchart

Short Put Strategy in Action

Recently, I have advocated for selling OTM put options on MSFT. For instance, in an article published on December 9, I detailed how investors could generate a 1.1% yield by shorting one-month Microsoft puts.

At that time, selling the $475.00 strike put option (expiring today) was suggested while MSFT traded at $491.00, making the strike price more than 3% below the market price.

Each contract sold brought in a premium of $5.63, equating to $563 per contract (100 shares), requiring $47,500 in collateral. This resulted in a one-month yield of approximately 1.185%.

With the option likely to expire worthless, investors can consider repeating this short-put approach for another month.

Analyst Price Targets Remain High

In a November 4, 2025 article, I estimated that MSFT shares could reach as high as $682.55 within the next year, based on robust Q1 FY26 results and a 33% free cash flow margin.

Since then, analysts have increased their revenue projections for the coming years, suggesting that my price target, which assumed a 30% FCF margin, could be revised upward.

Analyst sentiment remains strong: Yahoo! Finance notes that 57 analysts have raised their price targets to $622.51, close to the $626.71 level from two months ago. Barchart’s average price target is $630.07, compared to $632.77 previously.

Overall, the consensus is that MSFT stock is still undervalued.

Current Opportunity: Selling One-Month MSFT Puts

Looking at the February 6, 2026 expiration, the $455.00 strike put option is trading at a midpoint premium of $7.60. This offers an immediate yield of 1.67%, with the strike price set 4% below the current share price.

By setting aside $45,500 in cash or margin, an investor can sell to open one put contract at this strike price.

Potential Returns and Additional Strategies

Upon executing this trade, the investor receives $760 instantly, representing 1.67% of the collateral required to potentially purchase 100 shares at $455.00.

If MSFT’s price remains stable or increases toward analysts’ targets over the next month, the investor is not obligated to buy the shares at the lower strike price.

Over the past two months, this short-put strategy has generated a total income of $13.23 per share, or $1,323 on an average $46,500 investment—an effective return of 2.845%.

Annualizing this approach could result in a return of 17%, assuming similar opportunities persist.

This method not only sets a lower potential entry price for MSFT shares but also provides additional income along the way.

For those willing to take on more risk, the income generated from selling puts can be used to purchase in-the-money call options with longer expirations, allowing for participation in potential upside with less capital at risk.