DRYS Jan 2011

Quote from Bben1006:

Actually, this might be a classic case for combining the two:

Buy the stock at $6.08
sell a March 7 call at $0.81
and, sell a March 6 put at $1.10

However, remember that aside from having a similar risk profile, there is one big difference: one you will do with an underlying that you own and would not mind to lose ; while the other one you will do with an underlying that you do not have, but wouldn’t mind to own. Doing these two simultaneously, say by March, gives you ample time to decide which of the two scenarios is more fitting for you.
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Other than margin considerations, there's no significant difference b/t the natural and the synthetic (ignoring the obvious of slippage and commissions).

ITM write (CC) gives more downside protection, less upside gain. OTM write gives more upside protection, less downside gain. Doing one of each just blends the risk profiles.
 
Quote from droid17:

2. I can get more leverage with options, in addition if if were to get in the money with much more time value left I could sell for more then if I just flat out owned the stock. [/B]
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You should be dubbed the King of DRYS Strategies :)

Beware of leverage when dealing with equities or equivalents. It's a double edged sword.
 
Quote from droid17:

Hi all :)

I am looking at a DRYS Jan 2011 play. Here are my background thoughts.

Right now I feel the value of DRYS is an unknown. If oil collapses the drill ships that are being built could have negative value, but the CEO has preferred shares so he has skin in the game.
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I don't understand why you'd mention the CEO's position as acting in your favour, if the value of the stock according to your own analyses is not tied to the CEO's acting but to the demand for oil.

Neither you nor the CEO have any control over oil prices so the CEO's position shouldn't be a factor of consideration.
 
Quote from dmo:

1. Sure. But by the same token, if it goes up to 7.50 you come out a loser with the option play, a winner if you buy the stock.

2. This is the one that has me worried for you. It's easy to forget that leverage works both ways.
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he is long the 7.50 call. are you assuming 7.50 at expiration?
 
Quote from droid17:

Right now I feel the value of DRYS is an unknown. If oil collapses the drill ships that are being built could have negative value, but the CEO has preferred shares so he has skin in the game.
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Just about every CEO has skin in the game via a high salary, preferred shares, stock options, etc. Not that my memory is that good (g) but I can't ever remember a year or so (08 to 09) when so many stocks were delisted from option trading due to bankruptcy of crashing to under $5. Every one of their CEO's lost their skin so that's no perrequisite for success.
 
Quote from zdreg:

he is long the 7.50 call. are you assuming 7.50 at expiration?
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Right. He paid I think a quarter or so for that put/call combo, so if DRYS is at 7.50 at expiration, he loses whatever he paid for the combo.
 
DryShips has signed an agreement with Commerzbank and West LB on waiver terms for $70M of its outstanding debt. This agreement is subject to customary documentation
 
I just thought DRYS is taking an unique position by moving into drill ships at the time they did. I feel GE will look like a genius is this gamble pays off.
 
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