The Short Answer: What Makes a Good MSFT Covered Call This Week

For most retail covered-call writers, the best MSFT covered call this week is a slightly out-of-the-money (OTM) call expiring in 7–14 days, with a delta between 0.25 and 0.40, that collects at least 0.5% of the stock price in premium. At a recent MSFT price near $420, that means targeting strikes in the $425–$435 range and collecting $2.00–$4.50 per contract ($200–$450 per 100 shares) before commissions.

The 'best' strike is not a single number — it depends on how much upside you are willing to give up and how much downside cushion you need. This article walks you through the math, the trade-offs, and the risks so you can make that call yourself.

Why MSFT Is a Popular Covered-Call Candidate

Microsoft is one of the most liquid options markets in the world. CBOE data consistently shows MSFT among the top 10 equity options by open interest and daily volume. That liquidity matters for retail traders because tight bid-ask spreads mean you lose less money on the fill. A spread of $0.05–$0.10 on a $3.00 premium is far better than a $0.30 spread on a thinly traded name.

MSFT also tends to have moderate implied volatility (IV) relative to its size. It is not as calm as a utility stock, but it is not as explosive as a small-cap biotech either. That middle ground produces premiums that are meaningful without requiring you to take on extreme risk of a violent gap move wiping out your cushion.

One more practical point: MSFT pays a quarterly dividend (currently $0.75 per share). If you write a call that expires before the ex-dividend date, you keep the dividend. If your call is deep in the money near the ex-date, early assignment is possible. The Options Industry Council (OIC) explains this dynamic in detail in its covered-call educational materials — it is worth understanding before you write calls around dividend dates.

A Worked Example: Writing the MSFT $430 Call Expiring This Friday

Let's build a real trade. Assume MSFT is trading at $420.50 on Monday morning.

**The setup:** - You own 100 shares of MSFT (cost basis: $395, so you are sitting on a $25.50/share unrealized gain). - You sell 1 MSFT $430 call expiring Friday (4 days out). - The bid-ask on that call is $2.80 / $3.00. You place a limit order at $2.90 and get filled.

**The math:** - Premium collected: $2.90 x 100 = $290 before commissions. - That is $290 / $42,050 = 0.69% return in 4 days, or roughly 63% annualized if you could replicate it every week (you cannot, but it frames the yield). - Your effective sale price if assigned: $430 + $2.90 = $432.90 per share. - Your downside cushion: The $2.90 premium offsets the first $2.90 of any drop. If MSFT falls to $417.60, you break even versus just holding the stock.

**What happens at expiry:** - MSFT closes at $425 (below $430 strike): Call expires worthless. You keep the $290 and all 100 shares. You can write another call next week. - MSFT closes at $435 (above $430 strike): You are assigned. You sell 100 shares at $430. Your total proceeds are $430 + $2.90 = $432.90. You miss the move from $430 to $435, which is $500 of upside you gave up. That is the real cost of the strategy. - MSFT closes at $418 (drops $2.50): You still own the shares, now worth $418. Your net loss versus Monday's open is $2.50 - $2.90 = -$0.40 per share. The premium softened the blow but did not eliminate it.

This example uses round numbers for clarity. Actual fills depend on market conditions at the time you trade.

How to Choose the Right Strike: Delta as Your Guide

Delta is the single most useful number for picking a covered-call strike. It tells you the approximate probability that the option expires in the money (ITM). A delta of 0.30 means roughly a 30% chance of assignment at expiry — or put another way, about a 70% chance you keep the shares and pocket the full premium.

Here is a simple framework for MSFT weekly calls:

**Conservative (income focus, low assignment risk):** - Strike: $432–$438 range (roughly $11–$17 OTM at $420.50) - Delta: 0.15–0.25 - Typical premium: $1.00–$2.00 - Best for: Traders who strongly want to keep their shares and are happy with a smaller premium.

**Moderate (balanced approach):** - Strike: $425–$432 range ($4–$11 OTM) - Delta: 0.25–0.40 - Typical premium: $2.00–$4.00 - Best for: Most retail covered-call writers. Good premium, reasonable chance of keeping shares.

**Aggressive (maximum premium, high assignment risk):** - Strike: $420–$425 range (at-the-money or just OTM) - Delta: 0.40–0.55 - Typical premium: $4.00–$6.50 - Best for: Traders who are comfortable selling at current prices and want the highest cash yield.

Never write a covered call at a strike below your cost basis unless you fully understand you are locking in a loss on the stock leg. FINRA reminds investors that covered calls do not eliminate downside risk — they only reduce it by the amount of premium collected.

Risks You Need to Understand Before You Write the Call

Covered calls are considered one of the lower-risk options strategies, but they carry real risks that deserve honest treatment — not a footnote.

**Capped upside is a real cost.** If MSFT jumps 8% after an earnings beat and your call is $10 OTM, you still get called away at the strike. You collected $3 in premium but gave up $80 in stock appreciation. Over a long bull run, repeatedly capping your upside can meaningfully reduce your total return versus just holding the stock.

**You still own the downside.** If MSFT drops $40, your $3 premium covers $3 of that loss. You are still down $37 per share. A covered call is not a hedge — it is a yield enhancement that provides a thin cushion.

**Early assignment.** American-style options (which MSFT options are) can be exercised any time before expiry. This is rare for OTM calls but can happen for deep ITM calls, especially before an ex-dividend date. The OIC covers early assignment mechanics in its free options education resources.

**Tax treatment is not simple.** In the United States, the IRS treats covered-call premiums as short-term capital gains in most cases, regardless of how long you have held the stock. Writing a call can also affect the holding period of your underlying shares, potentially converting a long-term gain into a short-term gain if the call is ITM. IRS Publication 550 covers investment income and expenses, including options. In Canada, the CRA has its own rules — premiums received may be treated as capital gains or business income depending on your trading frequency. Consult a tax professional before writing calls on shares with large embedded gains.

**Liquidity risk at the close.** If MSFT is trading right at your strike on expiration Friday, you face pin risk — uncertainty about whether you will be assigned. You can buy back the call before the close to avoid this, but that costs money.

Timing Your Entry: When During the Week Is Premium Richest?

Theta — the daily time-decay component of an option's price — accelerates as expiry approaches. For weekly options, the sharpest decay happens in the final two days. This creates a timing trade-off.

If you sell the call on Monday morning, you collect the most premium but give the market four full days to move against you. If you sell on Wednesday or Thursday, you collect less premium but the call decays faster and you have less time exposure.

For most retail traders, Monday or Tuesday entry on a weekly call is the standard approach. It balances premium size against time exposure. Avoid selling right before a major scheduled event — MSFT earnings, Federal Reserve rate decisions, or major macro data releases — unless you are intentionally targeting the elevated implied volatility that surrounds those events. IV typically collapses sharply after the event, which can work in your favor if the stock does not move much, but the stock can also gap violently.

Check MSFT's earnings calendar before writing any call. CBOE's website publishes options expiration calendars and you can find earnings dates on any major financial data platform. Writing a covered call into earnings without understanding the IV dynamics is one of the most common mistakes new covered-call writers make.

Rolling the Call: What to Do If MSFT Moves Against You

If MSFT rallies sharply and your call goes deep ITM before expiry, you have three choices: let assignment happen, buy back the call at a loss and keep the shares, or roll the call out and up.

Rolling means buying back your current call and simultaneously selling a new call at a higher strike and/or later expiry date. The goal is to collect enough additional premium on the new call to cover the cost of buying back the old one, while giving yourself more room for the stock to stay below the new strike.

Example: You sold the MSFT $430 call for $2.90. MSFT jumps to $434 and the call is now worth $6.50. You could buy it back for $6.50 (a $3.60 loss on the option) and sell the $438 call expiring two weeks out for $5.20, collecting a net credit of $5.20 - $6.50 = -$1.30. You paid $1.30 to roll, but you now have two more weeks and an $8 higher strike. Whether that trade makes sense depends on your outlook for MSFT and your willingness to stay in the position longer.

Rolling is not always the right move. Sometimes accepting assignment and redeploying the capital is cleaner. The OIC's covered-call module walks through roll mechanics in detail if you want to go deeper.

What is the best strike price for a covered call on MSFT this week?

For most retail traders, a strike $5–$15 above the current MSFT price (roughly delta 0.25–0.40) offers a good balance of premium income and a reasonable chance of keeping your shares. At a $420 stock price, that typically means the $425–$435 range for a weekly expiry. Your ideal strike depends on how much upside you are willing to give up and your personal income target.

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

For a slightly OTM weekly call on MSFT, you can typically collect $2.00–$5.00 per contract ($200–$500 per 100 shares), depending on implied volatility and how close the strike is to the current price. Premium is higher when IV is elevated — for example, around earnings or major macro events. Always check the actual bid-ask before placing your order, since these numbers shift constantly.

Will I lose my MSFT shares if I sell a covered call?

Only if MSFT closes above your strike price at expiration and the call is exercised, a process called assignment. If MSFT stays below your strike, the call expires worthless and you keep both the shares and the premium. You can also buy back the call before expiry to close the position and avoid assignment if the stock rallies sharply.

How does selling a covered call on MSFT affect my taxes?

In the US, premiums received from covered calls are generally taxed as short-term capital gains, and writing certain in-the-money calls can suspend or reset the holding period of your underlying shares, potentially converting a long-term gain to a short-term gain. IRS Publication 550 covers these rules. Canadian investors should check CRA guidance, as premiums may be treated as capital gains or business income depending on trading frequency — a tax professional can clarify your specific situation.

Should I sell a covered call on MSFT before earnings?

Selling before earnings collects elevated premium because implied volatility is high, but the stock can move sharply in either direction after the report. If MSFT gaps up past your strike, you miss a large gain; if it gaps down, the premium provides only a small cushion against a big drop. Most conservative covered-call writers avoid writing new calls in the week immediately before an earnings release.

What happens if MSFT drops a lot after I sell a covered call?

The premium you collected reduces your loss by that amount, but you still bear the full downside of owning the stock beyond that cushion. For example, if you collected $3.00 in premium and MSFT drops $20, your net loss on the combined position is $17 per share. A covered call is a yield-enhancement strategy, not a hedge — FINRA notes that it does not protect against significant stock declines.