DRYS earnings were pretty bad. I am glad I sold the common a week ago but the options will probably get beat pretty good. I bought 5 contracts so if they go worthless, I will lose $125 but I will try to sell them to today. Some hedge funds have losted some serious money on this trade because over 19,000 calls were traded at various April strikes, betting on a big number. If you got in at $4, you should be fine. Below is the earnings recap.
As for the market, futures indicate we are right at support on the S&P. I will continue to use 805 as my support level, however, if we break 785 looks like the next support level. JP Morgan cut their estimates on the S&P this morning, which may cause some sell; however, I believe they trimmed 09 estimates by like $4 or $5 dollars, which isn't too bad. As for the portfolio, I am long TTWO, NTGR, COH, SHORT WRI, and have various options plays.
DRYS Earnings Recap:
4:17AM DryShips misses by $0.23, beats on revs (DRYS) 5.52 : Reports Q4 (Dec) earnings of $0.43 per share, excluding non-recurring items, $0.23 worse than the First Call consensus of $0.66; revenues fell 6.6% year/year to $217.9 mln vs the $209.6 mln consensus. For Q408, Net Voyage Revenues (Voyage Revenues less Voyage Expenses) amounted to $117.1 mln as compared to $223.5 mln for the quarter ended December 31, 2007. For Q408, revenues from drilling contracts following the acquisition of Ocean Rig amounted to $87.5 mln. Operating Loss from both segments was $794.3 mln for Q408, as compared to Operating Income of $211.9 mln for the quarter ended December 31, 2007. Total Net Loss, from both segments, for the quarter ended December 31, 2008 was $1.02 bln or $18.42 loss per share as compared to the Net Income of $194.4 mln or $5.35/share for the quarter ended December 31, 2007. The co has previously reported a definitive and a preliminary agreement with certain lenders relating to the waiver of breaches of loan covenants. DRYS remains in discussions with its other lenders concerning current breaches of loan covenants. Pending the outcome of such discussions, the co has reclassified approx $1.8 bln in debt as short-term. Co expects to incur loss of approx $116.4 mln in Q109 associated with disposal of three Capesize newbuildings.
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Your play on DRYS might not work out too bad. The $9 calls had the least amount of call volume and you got them for only $.25. The big losers are the people who bought the $10 calls at $0.15. I now see why you picked the $9 calls, if they would have beat earnings the stock would be at $7+ and your calls could have doubled. Making $125 on $125 aint a bad risk/reward.
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