Best Covered Call to Sell on Microsoft Shares This Month: A Step-by-Step Framework

The Short Answer: How to Find the Best MSFT Covered Call Right Now

The best covered call on your Microsoft shares this month is typically a 30-to-45-day, out-of-the-money call with a delta between 0.20 and 0.35 — one that pays you a premium worth at least 1% of the stock price while still leaving room for the stock to rise. You sell one contract per 100 shares you own, collect the premium upfront, and keep it as long as MSFT closes below your strike at expiration.

That framework works for most retail traders most of the time. The rest of this article shows you exactly how to apply it to a real MSFT position, what the numbers look like today, and where the real risks hide.

Why Strike Price and Expiration Date Drive Everything

Two decisions control your outcome: which strike you pick and how far out you go. Get these right and the covered call does what it is supposed to do — generate income without forcing you to sell shares at a price you would regret.

**Strike price** determines your upside cap. If you sell a $440 call on MSFT and the stock runs to $460, you still sell at $440. You keep the premium, but you miss the extra $20 per share. Pick a strike too close to the current price and you collect more premium but risk giving up big gains. Pick a strike too far out and the premium barely moves the needle.

**Expiration date** controls how fast time decay (theta) works in your favor. Options lose value every day they sit unsold. The decay accelerates in the final 30 days before expiration. That is why the 30-to-45-day window is the sweet spot most professional covered-call writers target. Going out 90 days ties up your shares longer and adds more uncertainty. Going out only 7 days means you repeat the work every week and face wider bid-ask spreads on most retail platforms.

The Options Industry Council (OIC) describes this decay curve in its free options education materials and confirms that short-dated options lose value faster on a per-day basis as expiration approaches — which is exactly what you want when you are the seller.

A Worked Example: Selling a Covered Call on 100 Shares of MSFT

Let's say MSFT is trading at $420 per share. You own 100 shares. Here is how you would evaluate a specific trade.

**Step 1 — Set your target strike.** You want a strike with a delta around 0.25 to 0.30. At $420, that lands roughly at the $440 strike — about 5% above the current price. You are saying: "I am fine selling my shares at $440 if the stock gets there."

**Step 2 — Check the premium.** Pull up the option chain for the expiration roughly 35 days out. The $440 call might be quoted at $4.20 bid / $4.40 ask. You would aim to fill at $4.30 — the midpoint. That is $430 in cash per contract (each contract covers 100 shares), credited to your account the same day.

**Step 3 — Calculate your yield.** $430 premium ÷ $42,000 position value = 1.02% for 35 days. Annualized: 1.02% × (365 ÷ 35) = roughly 10.6% annualized yield on your existing shares. That is real income from stock you already own.

**Step 4 — Know your break-even and cap.** Your effective downside break-even drops from $420 to $415.70 (stock price minus premium collected). Your upside is capped at $440 plus the $4.30 premium = $444.30 effective maximum gain per share for this cycle.

**Step 5 — Decide on assignment.** If MSFT closes above $440 at expiration, your 100 shares get called away at $440. You keep the $430 premium on top. If MSFT closes below $440, the option expires worthless, you keep the premium, and you still own the shares. You can then sell another call next month.

How Implied Volatility Changes What You Should Sell

Premium is not fixed. It rises and falls with implied volatility (IV). The CBOE publishes the VIX — the market's broad fear gauge — and individual stocks have their own IV readings you can see on any options chain.

When MSFT's IV is elevated — say, around an earnings announcement — the $440 call might pay $7.00 instead of $4.30. That is a much better deal for the seller. Many experienced covered-call traders avoid selling calls in the week before earnings because the stock can move sharply in either direction. If MSFT gaps up 10% on earnings, your shares get called away at a strike that now looks far too low. If MSFT drops 10%, the premium you collected barely cushions the loss.

A practical rule: check where MSFT's IV rank sits. IV rank compares today's IV to its 52-week range. An IV rank above 50 means options are relatively expensive — good time to sell. An IV rank below 30 means options are cheap — consider waiting or moving your strike closer in to collect a decent premium.

Most retail brokerage platforms (TD Ameritrade/thinkorswim, Fidelity, Schwab, IBKR) display IV rank or IV percentile on the options chain screen.

The Real Risks You Need to Understand Before You Sell

Covered calls are one of the lowest-risk options strategies — FINRA classifies them as a Level 1 options strategy, the most basic tier — but they are not risk-free. Here is what can go wrong.

**You cap your upside.** If MSFT announces a blowout quarter and jumps from $420 to $480, you still sell at $440. You made money, but you left $36 per share on the table. This is the single biggest complaint from covered-call traders and it is a real cost.

**The premium does not protect you from a big drop.** If MSFT falls from $420 to $360, your $4.30 premium reduces your loss to $55.70 per share — not eliminates it. Covered calls are an income tool, not a hedge.

**Assignment can happen early.** American-style options (which MSFT options are) can be exercised any time before expiration. Early assignment is rare but more likely when the option is deep in the money or just before an ex-dividend date. If you get assigned early, your shares are sold at the strike price. The SEC's investor education resources note that early exercise is the option buyer's right, not yours to control.

**Tax treatment is not simple.** The IRS treats covered-call premiums as short-term capital gains in most cases, regardless of how long you have held the stock. More importantly, selling a call that is "in the money" or "qualified" can suspend the holding period on your shares — which matters if you are trying to qualify for long-term capital gains rates. The IRS Publication 550 covers this in detail. Canadian investors should check CRA guidance, as covered-call premiums are generally treated as capital gains but the rules around superficial losses and adjusted cost base interact with your call writing activity.

A Simple Decision Checklist Before You Place the Order

Run through these five questions before you sell any covered call on your MSFT shares.

1. **Am I comfortable selling at this strike?** If MSFT hits $440 and your shares get called away, will you be okay with that outcome? If not, move the strike higher.

2. **Is there an earnings announcement before expiration?** Check MSFT's investor relations calendar. If yes, consider waiting until after earnings or choosing an expiration that does not straddle the announcement.

3. **Does the premium meet my minimum threshold?** Most covered-call writers set a floor of 0.75% to 1.5% of the stock price per month. Below that, the trade may not be worth the complexity and tax paperwork.

4. **What is my plan if the stock drops sharply?** Decide in advance: will you buy back the call and sell the shares, hold and sell another call next month, or do nothing? Having a plan prevents panic decisions.

5. **Have I checked the bid-ask spread?** A wide spread (more than $0.20 on a $4.00 option) means you are giving up edge. Use limit orders at the midpoint, not market orders.

Following this checklist consistently is more valuable than chasing the single "best" strike every month. Discipline and repeatability are what turn covered calls into a reliable income stream over time.

How to Adjust or Close the Trade Before Expiration

You are not locked in once you sell the call. You can buy it back at any time to close the position.

**Rolling up and out** is the most common adjustment. If MSFT rallies toward your strike faster than expected, you can buy back the original call and sell a new one at a higher strike and later expiration — often for a net credit. This gives your shares more room to run while keeping income flowing.

**Buying back early for a profit** makes sense when the call has lost 50% to 80% of its value quickly (say, MSFT drops or time passes fast). Many traders use a "50% profit rule" — if you sold the call for $4.30 and it is now worth $2.15, buy it back and free up the position. You keep half the premium and remove the risk of a sudden reversal.

**Letting it expire worthless** is the simplest outcome. If MSFT stays below $440 through expiration, the option expires, you keep the full $430, and you start fresh next month.

The OIC's free online courses walk through rolling mechanics in detail if you want to practice the math before doing it live.

What strike price should I sell on my Microsoft covered call this month?

For most retail traders, a strike about 4% to 6% above the current MSFT price — with a delta around 0.25 to 0.30 — balances premium income against the risk of having shares called away. If MSFT is at $420, that puts you in the $435 to $445 range. Always confirm you would be comfortable selling your shares at that price before placing the order.

How much premium can I realistically collect selling a covered call on MSFT?

On a 30-to-45-day, out-of-the-money call at roughly a 0.25 delta, MSFT typically generates $3 to $7 per share in premium depending on implied volatility levels at the time. That translates to $300 to $700 per contract on 100 shares, or roughly 0.7% to 1.7% of the position value per month. Premiums are higher around earnings and during broad market volatility spikes.

What happens if Microsoft stock goes above my strike price?

If MSFT closes above your strike at expiration, your 100 shares will be sold (assigned) at the strike price. You keep the premium you collected plus any gain from your purchase price up to the strike. You no longer own the shares after assignment, but you can use the proceeds to buy shares again and restart the covered-call cycle.

Is selling covered calls on MSFT taxed as ordinary income or capital gains?

The IRS generally treats covered-call premiums as short-term capital gains, reported in the year the position closes. Selling a deep in-the-money call can also suspend the long-term holding period on your underlying shares, which could affect your tax rate on those shares. Review IRS Publication 550 or consult a tax professional before your first trade, especially if you have held MSFT shares for close to one year.

Should I sell a covered call on MSFT right before earnings?

Most experienced covered-call traders avoid selling calls in the one to two weeks before a major earnings announcement. Implied volatility — and therefore premium — is elevated, which is tempting, but a large post-earnings move in either direction can result in early assignment or a loss that dwarfs the premium collected. A safer approach is to sell the call after earnings, when the stock has settled.

Can I sell a covered call on MSFT in a Canadian registered account like a TFSA or RRSP?

Yes, the Canada Revenue Agency (CRA) permits covered-call writing in registered accounts including TFSAs and RRSPs, provided your brokerage has approved the strategy for that account type. Premiums received inside a TFSA are generally sheltered from tax, but you should confirm your specific account permissions with your broker and review CRA guidance on derivatives in registered plans.