General Electric

(GE) - Get Report

came out with its much anticipated

earnings announcement today

. You don't need to read my column to learn about the highlights of the quarter.

But what you might find interesting is that despite the statement by Jeffrey Immelt that GE is committed to paying out $1.24 this year in dividends, the options market does not agree.

A look at the January 2010 $12.50 strike calls and puts demonstrates this. With the stock trading at $12.30, the bid price on the January 2010 $12.50 calls was $2.65 and the offer on the $12.50 puts was $3.40. That means that if you buy a put and sell a call, you have paid 75 cents for the right to sell the stock at $12.50, which equates to $11.75.

Image placeholder title

This position is commonly referred to as a synthetic or a combo. In this case, it is a synthetic short position. But why would an investor sell stock synthetically at $11.75 when they can sell it in the market for $12.30, a full 55 cents higher?

The answer is because a short stock position has to pay out the dividends, and the synthetic (long put, short call) does not owe the dividends. So the synthetic price in this low interest rate environment should be below the stock price by the expected dividends.

So if the synthetic has the stock only 75 cents below the current stock price, that means that the implied dividend for the next 12 months is 75 cents, not the full $1.24 that Immelt is insisting GE will pay. In addition, this synthetic was priced similarly Thursday. The comments, meant to reassure, didn't move the needle at all.

So the message here is two-fold. The first is that if you are going to buy GE because you think it will pay $1.24 in dividends for a better than 10% yield, then you should be aware that the very efficient options market is predicting that it will pay closer to 75 cents.

Second, if you plan to be short GE across any ex-date of a dividend, you should consider buying a put and selling a call instead, as you will synthetically pay a smaller dividend in the options than in the stock.

Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.

Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."