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DryShips Inc. (NASDAQ:DRYS) is following the broad-market trend higher, adding 5.7% to $3.50. The positive developments in the stock are affecting activity in its options pits, where calls currently outweigh puts by close to a 9-to-1 margin -- or 20,000 calls to 2,300 puts. Most active so far is the at-the-money October 3.50 call, where north of 6,300 contracts are on the tape, including a block of 969 that traded at the ask price. In fact, 72% of the calls have crossed at the ask, suggesting they were purchased, and the International Securities Exchange (ISE) reveals the creation of new long positions.
In order for the DRYS call buyers to profit, they need the shares to push above the strike price by the closing bell on Oct. 18, when front-month options expire. More specifically, the traders are looking for the shares to muscle north of $3.69, which is the sum of the strike price and the volume-weighted average price of $0.19.
Currently, the option's chances of finishing in the money are a little better than 1-in-2, given the call's delta of 0.52, or 52%. If that fails to occur, and DRYS is sitting south of the strike at the end of next week, today's speculators risk parting with no more than their original cash outlay.
From a technical standpoint, the shares have spent most of the past month above the $3.50 level, even touching a two-year high of $4.00 on Sept. 26. While DryShips Inc. (NASDAQ:DRYS) has given up considerable ground since then, it's still outperformed the broader S&P 500 Index (SPX) by nearly 16 percentage points during the past 20 sessions. From a longer-term perspective, the equity has more than doubled in 2013.
Finally, just last week, DRYS announced it was teaming with Evercore Partners to offer and sell up to $200 million in common shares. "Drybulk shipping rates and ship values have increased recently and we believe this trend will continue particularly in the larger asset classes," CEO and Chairman George Economou said. "Given the improved market backdrop, we believe this is an opportune time to flexibly access the equity capital markets to reduce some or all of our funding needs through 2014 that we currently estimate at $150 million."
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