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 International Business Machines stays above $155 through 9/17/2027, the put expires. You keep the premium and never buy the shares.
• If it closes below $155, you buy 100 shares at that price, about $148.95 each after the premium, 33% below today’s price. The stock may have fallen further by then.
• The cash you set aside can also sit in Treasury bills at about 4.2% a year while it waits. That interest is yours with or without this trade, so it is not counted in the income above.

IBM’s Sales And Operating Margin Have Been Rising

You might want the shares because IBM has grown, and it keeps more of each dollar of sales than it used to. Revenue was $69.1 billion over the last twelve months, up from $64.0 billion a year earlier. IBM’s operating margin rose from 14.4% three years ago to 15.5% two years ago. It then reached 17.1% a year ago and 18.4% over the last twelve months.

Software is the largest part of that business. It brought in $30.0 billion in fiscal 2025, about 44% of IBM’s revenue that year. Those software sales grew 10.6% from fiscal 2024.

Yet the stock is cheaper than it was, and IBM’s second quarter of fiscal 2026 was weak. Revenue grew just 1% in that quarter, well below the pace of the past year, a result management said fell short of expectations. Management said many clients moved their spending to servers, storage and memory, and tens of large deals did not close on time.

IBM Needs Its Software Sales To Pick Up Again

IBM’s software revenue grew 5% in the second quarter of fiscal 2026, but organic growth was flat. Given this weaker-than-expected growth, management then cut its forecast for 2026 software growth to a range of 6% to 8%. The low end of that range assumes clients keep spending the way they did recently, management said.

About a third of the deals that slipped had closed within three weeks, management said. It called that a good indication, though not yet full evidence, that the orders were delayed and not lost. IBM is already strong among the Fortune 1000, and it aims to sell to thousands of additional clients beyond them.

The trade comes down to whether you would be glad to own IBM at $155, and software is the part to watch. You will know more when IBM reports its full-year 2026 results. Software growth above the 6% low end of management’s range for that year would suggest that the clients who held back in the second quarter have returned.

Does This Mean You Should Act On IBM?

Our purpose is to inform you with unique data so that you make the right investment decisions. That said, betting on a single stock is always risky, no matter which direction you choose.

There is a smarter approach. Since its inception, the Trefis High Quality (HQ) Portfolio has returned 105%, beating the benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000. And it did so without taking the concentrated risk that comes with do-it-yourself stock picking. If that is how you want to invest, the HQ Portfolio is the place to start.