Craziness In Water Transportation and Coal Stocks (DRYS, BTUUQ)

We have written about Peabody Coal (BTUUQ) a couple of times previously – amazed at the rapid advance and short squeeze that occurred there.  That stock had a second surge, post-election, as did many other coal stocks.  But the action there pales in comparison to what’s happened in the “Water Transportation” stocks this week.  These include the big oil tanker companies and the general shipping of things on the ocean.  The whole sector has been very strong, but the “king” is Dry Ships (DRYS).  The stock was up 1500% in just a few days and would have been higher except for the fact that trading was halted on Wednesday.  But yesterday it lost 85% of its value in one day!   So the round trip has taken the stock from 4.50 on November 8th, to 102 on the 15th (and during the trading halt, the stock was indicated as high as 116), all the way back down to 11 by yesterday’s close.  

As it was with BTUUQ, there is little in the way of solid reasons why this has happened.  Yes, there has been a general commodity rally in the wake of the election, but this is crazy.  Short covering has certainly played a role, too.  Who’s to say that there won’t be more zaniness in DRYS in coming days?

All week long, there has been heavy stock and/or option volume in many of the other names in this sector.  On Wednesday, November 16th, all of these water transportation stocks had heavy option volume: CMRE, DSX, GSL, NAT, NM, NMM, NVGS, SALT, SB, SBLK, SSW, STNG, THK, and TNP.  DRYS was halted that day.  In addition, DCIX, EGLE, ESEA, and TOPS had extraordinarily strong stock volume.  None of those rose as fast as DRYS, but then none of them fell as far yesterday, either.

This article was featured in the most recent edition of  The Option Strategist Newsletter (published 11/18/16).