XLU just delivered the sharpest single-day short unwind of its recent cycle — and the borrow market has flipped almost overnight from very tight to genuinely loose.
Yesterday's note flagged a tightening borrow market with availability collapsed to 15.7% and short interest climbing back to 11.3% of the float. Twenty-four hours later the picture looks entirely different. Short interest dropped 8.1% in a single session on June 23, pulling back to 10.4% of the float — roughly 25.9 million shares. That one-day unwind reversed most of the fresh shorts that piled in over the prior week. The weekly change is still marginally positive at +1.8%, but the directional conviction that was building as recently as Monday has evaporated.
The borrow market has responded with equal speed. Availability has jumped from 15.7% on June 22 to 116% on June 23 — a near eight-fold loosening in one session. A week ago, barely one share was available for every six already borrowed. Now there is more stock available to lend than is currently lent out. Cost to borrow has moved in the same direction, dropping from 0.81% on June 22 to 0.45% on June 23, the lowest reading in over a month. The lending market is no longer pricing in any real difficulty sourcing borrow. This mirrors the pattern seen in early June, when availability snapped back sharply after the late-May episode in which the pool was nearly fully exhausted — bottoming at 5.4% on May 21.
The ORTEX short score reinforces the shift. It eased to 53.0 on June 23, down from 56.1 on June 22 and the lowest reading in the ten-day history shown. That's still a moderate reading — not extreme in either direction — but the direction of travel matters. Every component feeding into that score has moved in the same way: fewer shares short, looser borrow, lower cost. The score peaked mid-week and is now retreating. The short pressure that was intensifying as recently as Monday morning looks, at least for now, like another false dawn for the bears.
Options positioning tells a calmer story than the short side. The put/call ratio is running at 2.39, slightly below its 20-day average of 2.52 — a one-and-a-half standard deviation move toward less defensive positioning. For context, XLU structurally carries a high PCR as a defensive ETF with natural put demand from hedgers; the current reading is not unusual in absolute terms. The modest drift lower over the past two weeks suggests options traders are not adding fresh downside protection at the current level, even as the short-selling crowd was briefly rebuilding.
Institutional ownership data from March provides some structural context. The holder list is dominated by wealth management and brokerage platforms — Morgan Stanley, JPMorgan, UBS, LPL Financial — adding up to a largely buy-and-hold, income-oriented base. These holders are not the same cohort driving the short interest swings. The quarterly dividend recently paid was $0.28 per share, down from the $0.52 levels of 2022, which partly reflects NAV-level changes in the ETF. The ETF itself is trading at $45.07, essentially flat on the week after a 0.8% bounce on June 23, and off just 0.6% over the past month.
What to watch next is whether the short base stabilises again around the 10% level — as it did after the June unwind — or whether this session marks the start of a more sustained retreat toward the 8-9% range last seen before the late-May squeeze episode began.
See the live data behind this article on ORTEX.
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