Volatile DryShips shares rally on new debt agreement

Investors are cheering the news, with DRYS up more than 3% in early trading. The security is struggling to maintain a foothold above its 10-week moving average, which has provided tenuous support since late March.

Due to the equity's troublesome technical performance -- DRYS has shed 35.5% year-to-date, and 92.1% during the past 52 weeks -- short sellers have amassed a respectable position against the shares. During the most recent reporting period, the number of DRYS shares sold short increased by 41.8%, and these bearish bets now account for 8.6% of the stock's float.

Elsewhere on Wall Street, option players are rushing to buy calls on the equity. On Wednesday alone, traders on the International Securities Exchange (ISE) bought to open 14,312 calls on DRYS, compared to just 581 puts. In the June series of options, peak call open interest of 60,470 contracts lies overhead at the 7.50 strike.

Given the stock's propensity to make sharp, sudden moves, it's possible that some of the call buying activity has been generated by short sellers looking to hedge their bets. With DRYS on the upswing once again, look for call volume to continue its domination in the options pits.

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.