XLC, the Communication Services Select Sector SPDR ETF, sits in an odd spot this week: short interest has extended its rebuild from early June, but the pace is slowing and options traders are pulling back from the defensive extreme they held through May.
The short positioning story is nuanced right now. Shorts have continued to add since the June 10 note — SI % of free float has nudged up from 2.9% to 3.0%, with the weekly change running at roughly 15%. That sounds aggressive, but the daily picture tells a different story. Shares short actually ticked down slightly on June 16 from the June 15 level, suggesting the push higher may be running out of steam. The ORTEX short score, which climbed from 39 on June 1 to a peak near 51 earlier this week, has also drifted back to 50.6 — roughly neutral, neither a strong bearish signal nor a bullish one. The rebuild since early June has been real, but conviction behind it looks thin.
The borrow market echoes that ambivalence. Availability has loosened again, moving from a tight 60% on June 15 back up to 76% on June 16 — suggesting some shorts returned stock into the lending pool rather than pressing new positions. Cost to borrow remains low at 0.78%, and while it has risen about 29% on the week, the absolute level is nowhere near squeeze territory. Compare that to the 52-week low in availability of just 2%, hit earlier this year — the current setup is snug but far from stressed. The direction of travel in the lending market has shifted from "tightening fast" to something closer to "sideways."
Options positioning is the more interesting signal this week. The put/call ratio has dropped sharply — from readings above 7.5 that persisted through most of May and early June, down to 5.6 now. That is still elevated in absolute terms and sits comfortably above the 52-week low of 0.74, but it is nearly a full standard deviation below the 20-day average of 6.75. The drop is notable: throughout May, options traders were loading up on puts at a rate that put XLC near the top of its historical range for defensive positioning. That trade is unwinding. Fewer puts relative to calls suggests some of the hedges placed against this sector are being lifted or allowed to expire.
The price action gives context. XLC added 0.75% on the week and 0.12% on Tuesday, closing at $112.32 — touching a 52-week high according to the recent note from the ORTEX intelligence feed. That rally, driven partly by easing rate expectations and solid earnings from major holdings, is likely what is pulling options hedges off the table. When the ETF is making new highs, the put-heavy positioning of May starts to look like a trade that didn't pay, and rolling it forward becomes less attractive. The one-month change is still negative at -3.2%, so the weekly rally is a recovery within a softer stretch rather than a clean breakout.
The valuation snapshot for the underlying basket, though dated to September 2025, shows a PE near 19x and a price-to-book around 2.9x — both up meaningfully over 30 days, consistent with the recent price recovery in communication services names. Factor scores sit near the middle of the range, and the combined ORTEX score of 50.5 reflects the same story: nothing extreme in either direction.
The week ahead turns on whether the short rebuild gathers pace again or continues to fade — and whether the options put-unwind has further to run as the ETF holds near its highs.
See the live data behind this article on ORTEX.
Open XLC on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data. Content is informational only and does not constitute investment advice.
