Traders Betting Both Sides On DryShips Earnings (DRYS)

Investors and traders alike seem to be taking both sides of the trade ahead of the highly anticipated DryShips, Inc. (NASDAQ: DRYS) results.  The shipper is expected to report earnings after the close and First Call has non-GAAP estimates at $0.66 EPS and $209.55 million in revenues.  Where this gets interesting is what lies just beyond earnings estimates.

For starters, this quarterly report due is for the December 2008 quarter,  not exactly a timely report.  The March 2009 quarter is just about to end and those estimates are $0.38 EPS on $200.8 million in revenues.

As far as what lies ahead, the estimates for Fiscal December 2009 are $2.16 EPS and $840.9 million in revenues.  If the 2008 estimates are met then this represents a drop of more than 70% in earnings and about 20% in revenues.

The analysts are very mixed on DryShips, as you would expect.  To show how boom and bust and how volatile this company has been, its stock has traded in a range of $2.72 to $116.43 over the last year.  And it is still profitable if everyone’s estimates are accurate.

But again, here is where this gets interesting on the “trading both sides.”  The options have been very active and the $5.00 and $7.50 Call Options that expire in April have each traded over 10,000 contracts.  The puts have been less active with roughly twice as many calls having traded than puts today.

With the stock price of $5.66, determining a stock option expected price move is total guess work.  If you want a guess, the “guestimate” is a move being priced in of up to $1.30 in either direction.  But this is not a normal stock and this trades routinely with a price move of 20%.  Any chart analysis after a 96% sell-off is also something we’ll refrain from.

As I have joked about before on DryShips, “Depending on the mood of traders, the same bit of news could drive this up or down by over 20% on any given day.”

As of late February, the short interest in DryShips was more than 14.2 million shares.

JON C. OGG
March 24, 2009