Stocks which are trading under $5.00 per share (or even $10.00) are often referred to as being no better than stock options already. So what happens when you witness elevated options trading in a low-priced stock? That is the case today in DryShips INc. (NASDAQ: DRYS).
The move comes on the heels of a massive run higher in recent days from $2.16 up to $3.07… This is a gain of over 40% just in the last week. Trading volume is also compressing after new contract news. If an analyst decides to upgrade this stock, that would create another leg higher but it feels toppy here. The caveat is simple… One press release from the company can cause a massive run in either direction.
As far as stock options, this usually has very low contract volume. In just the $2.50 and $3.00 calls there has been a combined 5,000 contracts traded alone in the February expiration. There has been no corresponding Put option trading increase in contract volume for February. In fact, today’s Call volume is worth more than the open interest of the $2, $2.50, and $3 strike prices in the puts.
There have also been more than 1,000 contracts traded in the $2.50 March Calls and over 1,000 contracts in the March $3 Puts.
Shares are up another 3.3% at $3.08 on the day. Does it matter that the corporation is based in Athens, Greece along with so many other shipping companies? Not really.
JON C. OGG