Rick's Cabaret International, Inc. Puts (Repurchase)

Today, I repurchased the ten RICK February 2010 7.50 puts I had sold on 10/28, for $5.00 per put, or $50.00 total, less commissions. Instead of waiting until expiration and in all likelihood collecting the additional $50.00 of premium, I chose to lock in profit of $1,013.09 and free up the reserved cash more than a month prior to expiration.

Following strong quarterly earnings, two new acquisition announcements and an analyst upgrade, the market has become much more optimistic about the strip club operator's future, and is beginning to price the company at a multiple of earnings closer to what I believe is fair value. While I continue to like the stock's medium to long-term potential, I likely won't sell additional puts unless the stock declines substantially over the coming months.

IRR on this position, taking into account just the amount of reserved cash in the brokerage account, was 1,100%+. IRR on the position when taking into account the full amount of cash required to exercise ($7,500) was 100%+.