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In recent sessions, call buying has accelerated on drybulk carrier DryShips Inc. (NASDAQ:DRYS). On the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE), the stock has seen nearly 5,500 calls bought to open in the past week, compared to fewer than 100 puts.
Even after accounting for two weeks' worth of data -- including information from the NASDAQ OMX PHLX (PHLX) -- the bias toward long calls (relative to puts) holds up. Specifically, DRYS' 10-day ISE/CBOE/PHLX call/put volume ratio checks in at 30.40, as traders have initiated roughly 30 calls for every put in the last couple of weeks. Although some of this bias toward long calls over puts is a product of DRYS' modest per-share price of $3.17 -- simply stated, there's greater profit potential to the upside -- the current ratio ranks higher than 72% of similar readings from the previous 12 months. In other words, from a historical perspective, speculators have been scooping up long calls over puts at a faster-than-usual rate.
In the same vein, DryShips' Schaeffer's put/call open interest ratio (SOIR) of 0.29 indicates call open interest outstrips put open interest by more than a 3-to-1 margin among options expiring in the next three months. This SOIR also ranks in the 36th percentile of its annual range, suggesting the current skew toward short-term calls is stronger than it typically has been in the past year.
Digging deeper, front-month call open interest resides at DRYS' overhead April 3.50 strike. Currently, there are about 6,900 contracts here, the majority of which were bought to open. Going forward, however, this strike could actually function as a level of options-related resistance, as call writers may add selling pressure ahead of options expiration in an attempt to to keep the bets out of the money.
Elsewhere, the experts on Wall Street are quite skeptical of DRYS shares, as each of the six covering analysts rates the stock a "hold" or "strong sell." What's more, the consensus 12-month price target of $3.17 is in line with the equity's current per-share value, meaning the brokerage bunch foresees little growth moving forward.
Looking at the charts, it's surprising that the options crowd has yet to join their bearish counterparts on the Street. For one, DryShips Inc. (NASDAQ:DRYS) has lost nearly one-third of its value in 2014. For another, the shares have underperformed the broader S&P 500 Index (SPX) by roughly 33 percentage points during the last three months. From a contrarian perspective, an unwinding of bullish optimism in the options pits could create choppy waters for the struggling equity.