Shares of DryShips Inc. (NASDAQ: DRYS, Stock Forum) finished last week north of their 80-week moving average for the first time in more than two years, after the dry bulk transportation titan said its offshore drilling subsidiary plans to sell about $500 million of stock, in order to raise capital for the construction of ultra deepwater drill ships. What’s more, after tacking on roughly 17% since the start of December, the stock is now on pace to finish the month atop both its 10-month and 20-month trendlines for the first time since May 2008.
As a result of the security’s technical accomplishments of late, options traders have rushed DRYS’ proverbial bullpen. The stock has racked up a 10-day call/put volume ratio of 18.68 on the International Securities Exchange (ISE), which implies that speculators during the past couple of weeks have bought to open almost 19 DRYS calls for every put. What’s more, this ratio ranks in the 91st percentile of its annual range, indicating that options traders have initiated bullish bets over bearish at a faster clip just 9% of the time during the past year.
In the front-month series of options, speculators have taken a fancy to the equity’s near-the-money December 6 and 7 strikes, which have each seen more than 6,000 calls opened during the past three sessions. As such, the 6 strike has extended its lead as home to peak call open interest in the front-month series, with more than 35,000 contracts in residence. Meanwhile, the December 7 strike now harbors roughly 20,000 calls outstanding.
Meanwhile, the escalating affinity for short-term calls is further evident in the stock’s Schaeffer’s put/call open interest ratio (SOIR), which measures options slated to expire within three months. More specifically, the equity’s SOIR of 0.39 ranks in the 30th annual percentile, implying that near-term options traders have been more optimistically aligned toward DRYS just 30% of the time during the past 12 months.
However, it’s worth noting that short interest on the security skyrocketed by more than 25% during the most recent reporting period, and now accounts for about 5.4% of DRYS’ total available float. While this accumulation of bearish bets still represents less than a session’s worth of pent-up buying demand, the simultaneous influx in both call buying and short interest could indicate that short sellers are hedging their pessimistic positions with bullishly biased options.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.