NEW YORK ( TheStreet) -- I was asked to pick my most foolish and most wise stock trades. Picking the most foolish stock trade is no easy task -- not because I don't have any, but because there are so many.After 25 years of trying to beat the market I have made every mistake in the book, and invented a few new ones. In my mind I have made more foolish mistakes, but since Wall Street keeps score using dollars I will talk about one of my biggest losers. Although it plays a significant role, the amount of money lost isn't the primary reason for feeling foolish. My initial and repeated lack of discipline, and how easily I could have avoided (or mitigated) the trade, forces my head lower in shame. If you take anything away from this story, leave with a renewed sense of discipline, restraint and preparation in your investing. Because losing isn't about rotten luck, stock manipulators, the SEC, or anything/anyone else other than yourself. Here's the shortened highlight version of events.
Worst of Times: LehmanIn 2008, I was actively trading and by September I was enjoying an outstanding year, but I was also setting myself up for failure. After years of working on market timing entries and exits I felt I "finally made it" and it wasn't uncommon for me to make several trades a day over a week's time and not have any losers.
Best of Times: CrocsBut along with expensive lessons, I have memorable victories that stand out above the crowd. During the summer of 2007, before the market meltdown, if you weren't making money in real estate you were likely making money in the market. After all, it's not hard making money when all you have to do is pick a stock you like and buy it. The market was at all-time highs, and short-sellers were an endangered species. It was during this time that Crocs ( CROX) caught my attention. CROX Revenue Quarterly data by YCharts
Crocs was a rare perfect storm stock for short-sellers. It was trading for over 100 times earnings, had one primary and easily copied product, and high call option premium. I day-traded Crocs with a short bias, but my wisest trade was selling options and having the conviction to hold. It wasn't easy for someone who publically posts their trades -- especially in the face of others mocking me for "not understanding" how Crocs was changing footwear forever. What my critics didn't know or conveniently forgotten, was I had history on my side. All else being equal, after a stock increases from $10 to $50 a share in six months, it's extended. After breaking above $49 the first time, the weekly chart was a TD13. The critics (and shareholders) ignored that stocks trading above a P/E of 20 generally underperform those that are trading below. With Crocs trading near a 100 P/E, I knew the odds were in my favor technically and fundamentally. Remember, being right about a stock isn't enough. John Paulson wasn't alone shorting housing-related products, but many others caved in because they entered too early. I knew that I needed to get the timing right or possibly face exiting at the worst possible time. My solution was using premium collected from writing call options as my buffer in case I was early. M). By chance I saw a pair of Crocs on clearance. It was the first and only pair of Crocs I have bought, and I still have them. They are sitting on a shelf in my office. At the time of publication the author had no position in any of the stocks mentioned. Follow @RobertWeinstein This article was written by an independent contributor, separate from TheStreet's regular news coverage.