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What Are DryShips Inc. (DRYS) Bulls Waiting For?

Call buying has continued to surge on DRYS

by 5/31/2013 12:26 PM
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Despite a surge into earnings last week, DryShips Inc. (NASDAQ:DRYS) is largely unchanged for the month. In fact, the stock has advanced just 0.5% since the end of April -- to sit at $1.87 currently -- but that hasn't stopped bullish option traders from speculating on continued upside. Schaeffer's put/call open interest ratio (SOIR) for DRYS currently stands at 0.36, meaning total call contracts expiring in the next three months outweigh total puts by a margin of nearly 3-to-1.

Meanwhile, during the last 20 trading days, more than 35,000 calls have been purchased to open on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just 1,156 puts. What's more, DRYS has one of the highest five-day buy-to-open call/put volume ratio on the ISE and CBOE. Across this pair of exchanges, 3,388 calls have been purchased during the last week, versus just 81 puts.

After rallying into first-quarter earnings -- and dropping immediately thereafter -- DryShips Inc. has settled in just below the $2 level, around which the shares have traded since late 2011. The stock has also slipped back south of its 40-day moving average, above which it briefly crossed in a burst of pre-earnings excitement.

It looks like the analyst crowd is notably less optimistic toward DRYS. Of six analysts following the stock, five issue a "hold" recommendation, leaving one "strong sell" and not a single "buy." Also, the consensus 12-month price target for DRYS stands at $2.30, which is 23% higher than the stock's current level, but is $0.44 below the equity's 52-week high of $2.74, which was reached in September.


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