Skeptics Spooked by Sudden Rally in Genco Shipping & Trading Limited

Genco Shipping & Trading Limited (GNK) is on the upswing today after an upgrade from "hold" to "buy" at Deutsche Bank. The brokerage firm explained that "recent vessel dislocation... and continued strength in iron ore imports into China will likely continue to drive near-term upside in day rates and dry bulk stocks." GNK is up more than 10% this afternoon -- a rally that has no doubt left the stock's bears on their heels.

Puts have been the option of choice lately on GNK; on Friday alone, traders on the International Securities Exchange (ISE) bought to open 3,883 puts on the equity, compared to 649 calls. In fact, the stock's 10-day ISE put/call volume ratio of 1.04 ranks in the 59th annual percentile, revealing a growing bearish bias toward the shipping issue.

Short sellers have also swarmed GNK, with the number of shares sold short ballooning by 29% during the past month. Now, short interest accounts for a hefty 18.2% of the security's float.

In light of today's rally, some skeptics appear to be changing their tune on GNK. The stock's most active option is the December 30 call, where 5,101 contracts have crossed the tape. The majority of these calls have traded near the ask price, suggesting they were bought, and implied volatility is up 2.4% at last check. With just 1,551 contracts in open interest, it's likely that traders are adding new bullish bets here today.

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