Is Diana Shipping Topped Out?

Shares of Diana Shipping DSX have screamed higher this morning, touching an intra-day high of $10.19. Currently, shares are in the green by 5.88%, at $10.08. The stock has been moving parabolic over the past few weeks, jumping off of the 50-day moving average into the stratosphere. While the 20-day and 50-day moving averages are both upward sloping, shares are trading far above them, also way outside the upper Bollinger Band. On a technical, mean-reversion basis, shares could be due for a strong pullback here. Some of today's move can surely be attributed to short-covering, which also should lead to a pull back here as buying pressure diminishes. Supporting that notion is today's options action. While calls are largely in favor, by 28 to 1 no less, only 65% of all calls traded have been purchases on the offer. This indicates that some players are interested in selling upside premium here, not surprising given the bump up in implied vol here. The strike seeing the heaviest action is the March 2012 $10.00 strike, which has traded 6,325 times on open interest of only 3,047 contracts. The Feb2012 $10.00 strike is also active, having traded 2,970 times on 3,157 contracts. Given the current overall implied and historical volatilities (41% and 45%, respectively), the March 2012 $10.00 straddle (~50.5% vol) looks a bit pricy here. A covered short straddle could work well here. Diana Shipping Inc. is a holding company. The company is a global provider of shipping transportation services. It specializes in transporting dry bulk cargoes, including such commodities as iron ore, coal, grain and other materials along worldwide shipping routes.