From a Benz to a Datsun

Yea, it's like a backwards Kanye West track. DRYS is up approximately 82% since December 8th - I don't think I've ever received a swifter kick in the..yea you get it.

I can understand a stock being up 82% in a week because the company just came out with some stellar bit of news and their worries are now behind them. I can understand a stock being up 82% in a week because of a buyout at a premium to the market price. I can even understand a stock being up 82% in a week because of rumors being fed through malicious channels.

When none of those things happen, I can't understand why DRYS is up so much. People can point to valuation all they want, the grim reality here is that valuation is based of earnings, when a company is projected to not have earnings there is no way properly value them. Better yet, when bankruptcy is a serious consideration valuation generally means the amount of pennies on the dollar that are left.

This is the world that we live in and of course, I overlooked something. One of my favorite books of all time (Reminiscences of a Stock Operator) mentions repeatedly that traders should not fight the tape. There is no point in fighting the tape, rather try to go along with it.

For the past week now, I've been in a vicious fight with the tape. Of course, it has cost me a lot of money. I should have sold off my put options on DRYS on the first day that it rallied. I kept on telling myself that I know this company, I know it's fate, I know where it's headed and this is just a fools rally.

I discounted timing, big time. The company could be headed for Chapter 11 but for the time being it looks as if it's going to be trading in a range of $7-$11 until we receive news from the company itself. The stock would have to go down 60-70% in order for me to make a profit - don't worry, I'm not holding my breathe.

November was a picture perfect month. December is turning out to be the worst trading month of my life and all because of a huge position in DRYS. My put options expire on December 19th (also my birthday - what an awesome present!), so we still have four days for the stock to tank.

I'll post up my thoughts on this and the lessons learned as the week goes on. This is going to require a serious assessment of what went wrong and how we can prevent this from happening going forward.

For now, I'll be laying in the fetal position on my bed, lol.

See you guys tomorrow. Dow futures currently down 9 points, S&P 500 futures down 12.5.

-Nik