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DryShips Inc. (NASDAQ:DRYS) has hit a string of annual highs this week on news of increasing iron-ore exports in China. Not surprisingly, option traders have made a run at long calls. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators bought to open 6,997 calls on Monday, compared to 1,784 puts, resulting in a single-day call/put volume ratio of 3.92.
With DRYS currently trading at $2.92, which limits the profitability factor of long puts, bullish bets have been preferred over bearish in recent weeks, as well. Specifically, traders at the ISE, CBOE, and PHLX have purchased 51,493 calls during the past month, versus just 5,660 puts. The resultant 20-day call/put volume ratio of 9.17 points to a distinct bias for bought-to-open calls over puts of late.
As such, the equity now sports a Schaeffer's put/call open interest ratio (SOIR) of 0.32, which ranks in the 27th percentile of its annual range. Simply stated, short-term speculators are more call-heavy than usual toward DRYS.
In the front-month series, this has translated into peak call open interest at the September 2.50 strike, where 14,151 calls reside. The majority of these in-the-money calls have been bought to open, meaning traders expect DRYS to extend its lead north of $2.50 through the close on Sept. 20.
Looking elsewhere, it appears a portion of these speculators were willing to pay a pretty penny for their bullish bets. For starters, DRYS' Schaeffer's Volatility Index (SVI) of 83% ranks in the 49th percentile of its annual range -- its loftiest perch since late May. More specifically, implied volatility at the September 2.50 strike is inflated relative to the stock's 20-day historical (realized) volatility (89% vs. 69.1%), indicating premium is relatively expensive at the moment.
On the charts, DRYS is up nearly 89% on the year. Additionally, the equity has put in a solid performance against the S&P 500 Index (SPX), and has outpaced the broad-market barometer by almost 65 percentage points throughout the past 60 sessions.
However, after hitting a fresh 52-week peak of $3.22 earlier today, DryShips Inc. (NASDAQ:DRYS) has since reversed course, and was last seen roughly 5.1% lower. Given that the stock's Relative Strength Index (RSI) of 82 is sitting solidly in overbought territory, a near-term pullback may have been in the cards.