Looking back over the past two weeks' worth of data, DRYS has racked up an ISE 10-day call/put ratio of 5.31, revealing an even more lopsided preference for calls. This ratio ranks higher than 98% of other such readings, indicating a near-peak of optimism among traders on the ISE.

In Monday's session, the most active call was the April 5 strike. This option, which is narrowly in the money, saw 14,372 contracts cross the tape on open interest of 17,827 contracts. After yesterday's volume settled out, open interest at this strike grew by 7,187 and now stands at 25,014 contracts. The April 7.50 call is also popular, with open interest of 20,888 contracts.

At face value, this heavy buy-to-open call volume could indicate raging bullish sentiment ahead of DRYS' earnings report. However, it's interesting to note that short interest on the stock has surged by 64% during the past month, and these bearish bets now account for 40% of the equity's available float. With the number of shares sold short rising in tandem with call volume, we have to consider the fact that some short sellers may be hedging their bets by buying call options.

Meanwhile, analysts are skeptical. Zacks reports just one Strong Buy, compared to three Holds and two Strong Sells. The consensus estimate calls for DRYS to have netted a fourth-quarter profit of 66 cents per share, down sharply from $4.50 per share in the year-ago period.

Whether the recent flood of call volume represents true optimism, or simply uncertainty by the shorts, it looks as though DRYS is poised to make a breakout move post-report. The stock has already shed 92% year-to-date, but the shares could plunge further if they report disappointing numbers. On the other hand, a positive earnings surprise could spark a short-squeeze rally. In order to take advantage of major movement in the stock after earnings, investors may want to consider a straddle trade.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.