How to buy, sell and short Microsoft shares

How to buy and invest in Microsoft shares

You can buy Microsoft shares in two ways with IG – via share dealing or derivatives trading. If you want to own the physical shares and profit from upward share price movements, you’ll invest via share dealing. In doing so, you can also benefit from dividend payments, if the company pays them.

If you don’t want to own the shares, but rather speculate on share price movements, you’ll trade via derivatives such as spread bets and CFDs. With derivatives, you can trade Microsoft’s share price without taking direct ownership of the shares. Follow these steps to invest in or trade Microsoft shares:

Find out more about the differences between share dealing and derivatives trading

How much would it cost to invest in Microsoft?

Our US best commission is available to active clients who place three or more trades a month. If you don’t want to take ownership of Microsoft shares, you can also speculate on the share price with derivates. You’ll be able to:

• Get full exposure with a small deposit – usually just 20-25% of the full value of the trade¹
• Spread bet without paying any tax²
• Offset your losses against profits for tax purposes with CFDs

How to sell and short Microsoft shares

If you bought Microsoft shares, there may come a time when you want to sell them. Or, you may want to short Microsoft shares if you are using derivatives, in order to trade downward price movements. Follow these steps to sell or short your Microsoft shares:

Microsoft’s live market prices

Trading Microsoft with CFDs

A CFD – short for ‘contract for difference’ – is a financial product where you agree to exchange the difference in the price of Microsoft shares from when you open your position to when you close it. To buy Microsoft shares, you would go long on the market. To sell Microsoft shares, you would go short the market.

Spread betting on Microsoft

Spread betting on Microsoft shares means betting an amount of money per point on whether the share price will go up or down. The more the market moves in your predicted direction, the more profit you’ll make and the more it moves against you, the greater your loss.

How to trade Microsoft options

You can trade Microsoft options with IG by following the steps below:

1. Research the market
2. Open an IG trading account
3. Decide whether you want to buy or sell puts or calls
4. Call 020 7896 0000 to place your trade
5. Confirm your trade over the phone

A brief history of Microsoft

Microsoft was founded by Bill Gates and Paul Allen in 1975, after the pair wrote the BASIC programming language for the Altair 8800 microcomputer. Their business was registered as ‘Microsoft’ – a combination of ‘microcomputer’ and software’ – in 1976. Over the next three years, the company opened an office in Japan, made its first $1 million in sales and moved its head office to Washington.

After 11 years of product development and solid profits, Microsoft finally decided to go public. On 13 March 1986, it released more than three million common shares at $21 per share. One of the reasons Gates gave for the decision to hold the initial public offering (IPO) was to increase market liquidity. By the following year, Microsoft was the largest software company in the world.

During the 1990s Microsoft released one of its most successful products – Windows 95. More than 40 million units of the product were sold, the share price was climbing, and Gates was moving up on ‘the world’s richest’ list. Windows 98 followed and, right before the dawn of Y2K, the share price reached a high of $58.38. In 2000, Bill Gates stepped down as chief executive officer (CEO) and was succeeded by Steve Ballmer.

Microsoft launched a few unpopular products in the early-2000s, but the Xbox wasn’t one of them. Introduced in 2001, it sold 1.5 million units in only two months. By this time, Microsoft was nearing its ninth stock split, and the share price was dwindling due to increased competition in the industry. At the end of 2003, shares were trading at $27.45.

In 2004, the company announced that it planned to return up to $75 billion to shareholders by means of dividend payments. This had little effect on the share price, which only fell noticeably during the global financial crisis, after Microsoft had to cut around 5000 jobs. It wasn’t until 2012 that the share price took off again – this was attributed mostly to a sturdy revenue stream.

Satya Nadella took over from Ballmer as CEO in 2014, and Microsoft’s share price has nearly tripled since then. The company has invested a lot of its energy into cloud computing and is rivalling other tech companies such as Amazon and Apple.

Microsoft shares: the basics

Microsoft shares are listed on the Nasdaq 100 (US Tech 100 with IG) under the ticker MSFT. It’s important to understand the business and all corporate actions before you decide to invest in Microsoft or trade its shares.

Besides strong fundamentals and a high demand for the stock, Microsoft’s share price is also driven by what its competitors are doing. For example, Apple and Google are also at the forefront of global technology services.

Microsoft has undergone nine stock splits since its IPO. The most recent was a two-for-one split in 2003, which means shareholders received an extra share for every share they owned. With stock splits, the amount of shares increase, while the share price decreases in order not to affect the value of a shareholding or the company’s market cap. After the 2003 split, one original share equals 288 shares. As of 2019, Microsoft pays a quarterly dividend of $0.46 per share.

Microsoft key personnel: who manages the company?

Microsoft has several executives that manage the company in different regions across the globe. The key players are:

Microsoft also has a board of directors, which consists of 14 members and includes Nadella and Gates. John Thompson is the chairman of the board.

What is Microsoft’s business model?

Originally, Microsoft relied on licensing its software and the Windows operating system to make money, but its business model has evolved over the years. It all changed in 2014 when Microsoft started shifting its focus to product integration.

The Microsoft business model can be broken into four segments:

• Productivity and business processes: information, communication and productivity
• Intelligent cloud: server products and cloud services
• Personal computing: user and developer interests
• Corporate and other: alternative products and services

Microsoft fundamental analysis: how to analyse Microsoft

If you’re considering buying or selling Microsoft shares, you must first conduct fundamental analysis on the company. This includes studying Microsoft’s financials and a range of factors that affect the business. You can analyse the health of the economy and its sectors, study news reports, consider the competition, explore supply and demand, and evaluate the cost of production. By gathering this information, you can identify Microsoft’s inherent value.

Microsoft’s share value can be studied by using metrics such as the earnings per share (EPS), price-to-earnings ratio (P/E), the return on equity (ROE) and the dividend yield.

• Microsoft’s EPS determines the value attached to each share and whether the business is profitable or not. EPS is calculated by dividing Microsoft’s profit by the number of outstanding shares
• Microsoft’s P/E ratio outlines how much you must spend on shares to make $1 in profit. P/E ratio is calculated by dividing Microsoft’s current market value per share by its EPS
• Microsoft’s ROE measures how much income the company makes on assets compared to shareholder investments. ROE is calculated by dividing Microsoft’s net income by stakeholder equity
• Microsoft’s dividend yield compares the company’s annual dividends to the share price. Dividend yield, expressed as a percentage, is calculated by dividing the dividend amount by the share price, and then multiplying by 100

Learn more about fundamental analysis in this comprehensive guide

¹ Deposits for leveraged trades are 20-25% on 99.77% of tier one US shares.
² Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK