Puts for profits Feb 2010

Hi Everyone,

Here is a different way one can start investing for themselves.  Instead of buying a stock when one thinks it is the right time, one can receive a premium to possibly purchase a stock.  For example GE is a bell weather of the American economy.  You can purchase 100 shares at the current price of $21.44 as of 2/18/2011.  If you like me want to make money before purchasing the stock you can sell an option contract on this stock.  You can sell the March 21 put strike on GE for 38cents.  Let me try to explain, you can sell an option contract at strike price of 21 and receive $38.  Each contract represents 100 shares of the stock.  In summary, if you were to buy 100 shares of the GE stock it would cost you $2144.  What we have decided instead is to sell the March 21 put at 38cents,  where we would receive $38 dollars.  If the stock is above $21 you won't have to buy the 100 share by the March expiration (3rd Friday of the month) but you would get the $38 into your account.  Now you ask, what if the stock price falls below $21, well if this were the case you would have to buy the stock at @ $21 which would cost you $2100 minus the $38 dollars you receive in the premium.  Unfortunately if the stock falls to a much lower price by March expiration, you still have to purchase a hundred shares of the stock at $21, but in my opinion at least you are getting paid the $38 for purchasing the stock.   The $38 you receive of the $2100 is a pretty nice 21.7% return.  I know this may be confusing so if you have any question, please email me.