The bulls seem to be getting behind DryShips (DRYS, $6.50, up $1.75) this morning as the stock is rallying 40%. Shares are down from an all-time high of $116 as dry bulk rates have plummeted over the past few months.

In early September, we did a strangle option trade on DryShips which returned over 300%. Click here to read about the trade. At the time, the stock was at $60 and the chart for DryShips showed another move lower was in the works.

The Baltic Dry Index is at a 22-year low, and I’m not sure if the strength in DryShips will last. The company recently issued 20 million shares for the purchase of 9 Capesize drybulk carriers and is selling up to an additional 25 million shares to raise capital. Although shipping rates will eventually pick back up, I’d like to see a couple of solid quarters before we can call it a recovery.

Perhaps the bulls are a little early and there is some heavy action in the December 7.50 calls (OOCLU, $0.90, up $0.70) which are up 350%. It’s a risky trade but bulls are trying to push these calls in-the-money.

Rick Rouse