How To Create Income From IBM Stock

International Business Machines (IBM) stock has lost 18.0% over the past twelve months, while the S&P 500 returned 16.0%, so you may be wary of buying it. But there is another way to use the stock that most investors never look at. You can be paid today for agreeing to buy IBM at a much lower price. So what does that promise pay, and would you want to own the shares?

Here is the income you get: about 4.1% a year on the cash you set aside, for agreeing to buy International Business Machines at $155, 30.4% below today’s $222.64.

So how do you set up this trade? It is simple: sell a cash-secured put.

• Sell one put option on IBM expiring 9/17/2027, with a strike price of $155.

• Collect about $605 in premium per contract now (each contract covers 100 shares), at today’s bid.

• Set aside $15,500 in cash per contract to cover the purchase. The premium is 3.9% of that over 348 days, about 4.1% a year.

• If…