Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

DryShips Skeptics Expect a Continued Slide

Put buyers scooped up DRYS' July 2 contract

by 6/1/2012 9:25 AM
Stocks quoted in this article:

The shares of DryShips Inc. (DRYS - 2.21) retreated in tandem with the broader equities market yesterday, snapping their short-lived run north of their 10-day moving average. What's more, it looks like a slew of options traders are betting on the stock to explore year-to-date lows in the near future.

During the course of yesterday's session, DRYS saw more than 7,300 puts cross the tape -- about four times its average daily volume, and more than double the number of DRYS calls exchanged. Most of the action centered on the July 2 put, which saw more than 4,600 contracts change hands. Ninety-five percent of the puts traded at the ask price, and put open interest at the back-month strike skyrocketed by almost 4,300 contracts overnight, pointing to buy-to-open activity. By purchasing the puts to open, the buyers are expecting DRYS to breach $2 within the next couple of months.

However, yesterday's bearish betting is just a drop in the bucket for DRYS. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.50 stands just one percentage point from a 52-week peak. In other words, options traders have bought to open DRYS puts over calls at a near annual-high clip during the past couple of weeks -- likely in preparation for the company's earnings release, which hit the Street late Tuesday.

Speaking of DRYS' earnings, the firm confessed to a wider-than-anticipated first-quarter loss, but managed to finish the following session in the black. As alluded to earlier, however, the shares surrendered their foothold atop their 10-day trendline yesterday, thanks to broad-market headwinds and a bearish brokerage note. Specifically, Jefferies cut its price target on the equity to $2.50 from $3, and reiterated its "hold" rating. There's still a surprising amount of optimism surrounding DRYS, though, considering the stock's 52-week deficit of 42.3%. Currently, three out of seven analysts maintain "strong buy" opinions.

Daily chart of DRYS since April 2012


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.