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Covered calls on Microsoft: the mechanics, and the capital question

Microsoft is a common pick for covered calls because its options are busy and its business is steady. The premiums are moderate and the dates are predictable. The hard part is the share price: 100 shares of MSFT is a very large position for most accounts.

Options guide · 8-minute read · Updated 2026-10-27

What MSFT is like for a covered-call seller

Microsoft (MSFT) is one of the largest companies in the world, with software, cloud and gaming businesses. For a Covered call seller, that means:

• Busy options. Tight spreads at common strikes, deep Open interest and weekly expirations.
• Moderate Implied volatility. For a single stock, MSFT usually moves less than most. IV climbs before earnings and falls after.
• Quarterly earnings, usually reported near the end of January, April, July and October. Check the exact date each time.
• A quarterly dividend that the company has raised regularly for years. It's small next to the share price, but each quarter has an Ex-dividend date.

Nothing on this page is a recommendation. MSFT is here because people search for it, and because it shows what a high share price does to a covered-call plan.

The capital question

A covered call needs 100 shares per contract. At Microsoft's recent price, 100 shares cost tens of thousands of dollars, more than many accounts hold in total. Check today's price and multiply by 100.

That changes the plan:

• If 100 shares would be most of your account, the covered call doesn't lower that risk. It's still one stock carrying most of your money.
• If you'd get there by selling a put first in the wheel strategy, the put ties up the same amount at the strike.
• Fractional shares don't count. You need 100 whole shares for one contract.

Account note: covered calls are widely allowed in a TFSA or RRSP in Canada, and in most US IRAs, but options permissions differ by broker, so check yours.

A worked example (an illustration, not a trade idea)

These numbers belong to a made-up large software stock, XYZ. They are not Microsoft's prices.

You own 100 shares of XYZ bought at $400, worth $40,000. You sell one 45-day $420 call for $8.00 and collect $800. No earnings fall inside the window.

When 100 shares is too much

If the capital doesn't fit, here are the honest choices. Each has a cost.

1. Skip it for now. Practise the mechanics on a stock where 100 shares fits your cap. The skills carry over.
2. A poor man's covered call. This uses a long-dated call instead of shares, for less money. It's a different trade with its own risks, including losing the whole long call. Covered call vs poor man's covered call explains how.
3. A fund that holds it. Funds like QQQ hold Microsoft among many others. One contract there is also large. See the wheel on QQQ.

What doesn't work: stretching your account to buy 100 shares because the premium looks steady. Size by the shares, never by the premium.

Earnings and the dividend

Earnings. When a report falls inside the call's life, the premium rises, and so does the chance of a gap. A strong report can push the stock through your strike overnight. A weak one can drop it far below your cost. Many sellers choose an expiry that ends before the report. Covered calls before earnings works through the choice.

The dividend. Because MSFT's dividend is small next to its price, early assignment for it is less common. It can still happen if your call is in the money just before the ex-date with little time value left. Know the date before you sell.

What to check before you sell

1. Does 100 shares fit your cap per stock? If not, stop here.
2. The earnings date. Inside your expiry or not?
3. A strike above your cost, so being called away isn't a locked-in loss.
4. The ex-dividend date, if the call could be in the money near it.
5. What you already own. Many broad funds hold a lot of Microsoft. A covered call on top of that adds to the same bet.

Questions