It seems unbelievable that there was this much fear in the market! It meant that somebody thought GE would fall by 80% more almost two years out -- a time that even the most bearish think the recession is likely to be over. Well, sentiment changed, fear has dissipated, and I bought the options back, closing the position for 13 cents. This means I gave back 13 cents of the 52, for a profit of 39 cents in four months, a 15.6% return or 46.8% IRR. There was little to gain by holding on to it for another 18 months.

It's still bewildering that there are those that still think that GE could fall below $2.50 a share by this time. As of the market close last Friday June 26, the Chicago Board of Trade (CBOE) indicated open interest of 16002 contracts or 1,600,200 shares. I still think this is nuts, but the premium was running from 8 to 11 cents, so it's not worth tying up the money.

I usually do not consider naked puts that are not paying something over 10% premiums, and only in companies I want to own anyway. I still have an open position in GE January 2010 with a strike price of $10 that paid $1.10 per share, making my break-even point $8.90 a share. GE closed on Friday at $11.75 and the last price on puts was $0.10, leaving me 20 cents in the black for now.

I will be discussing some of my favorite recent options trades later this week.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GE and have open options as well.