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DryShips Inc. (DRYS): Option Traders Eye a Strong Start to 2014

DRYS' January 2014 4.50-strike call was bought to open yesterday

by 12/6/2013 10:51 AM
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Option Brief: Call volume soared on DryShips Inc. (NASDAQ:DRYS) on Thursday, as the stock rose in step with the broader Baltic Sea Exchange. By the time the dust settled, roughly 30,000 contracts had crossed the tape, nearly three times the average daily call volume. A number of speculators eyed a move into two-year-high territory over the next six weeks by scooping up January 2014 4.50-strike calls.

Considering DRYS hasn't traded north of $4.50 since May 2011, the options market is giving the call a slim 1-in-5 chance of an in-the-money finish. Specifically, delta for the call is docked at 0.19, or 19%. Should the stock fail to rise the roughly 28% necessary to topple the strike price, the most the traders stand to lose is the premium paid. According to Trade-Alert, the volume-weighted average price for the calls was $0.09 apiece.

With DryShips Inc. more than doubling on a year-to-date basis, a bullish bias has emerged among option players. Outside of the options pits, though, short interest rose nearly 30% during the latest reporting period to 13.98 million shares -- the highest amount of shorted shares since July 2012. In light of this, a portion of yesterday's buying activity at such a deep out-of-the-money strike could be indicative of short sellers hedging their bearish bets against an extended uptrend.

Fundamentally speaking, DryShips Inc. (NASDAQ:DRYS) announced yesterday it has suspended its stock offering. In today's session, the equity was last seen 2.5% lower at $3.51.


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