SPY closed Tuesday at $747.71, fractionally lower on the day but still holding near all-time highs — and the positioning picture has shifted meaningfully since last week's note.
The dominant change this week is a reversal in hedging demand. After the put/call ratio briefly spiked above 2.10 at the end of June — the most defensive reading in months — it has collapsed back to 1.75, now running nearly a full standard deviation below its 20-day average of 1.83. That is a material rotation away from downside protection. The 52-week range on the PCR runs from 1.27 to 2.40, putting the current reading comfortably in the lower half of that band. Options traders who were loading up on hedges into the holiday week have largely stepped back.
The availability picture tells a more nuanced story. Through early July the borrow market had loosened dramatically — availability climbed to 1,484% on July 3, the most comfortable reading of the year. That has since tightened sharply: availability dropped to 735% by July 7, an 18.6% pullback on the week. That is still comfortably loose by most standards (well above the 200–1,000% range that signals a normal borrow environment), but the direction has flipped. Short interest has ticked back up, adding roughly 2.6 million shares over the past two sessions to 104.7 million shares, or 10.2% of the free float. That is a genuine rebuild from the 102.1 million trough reported in the July 6 stock report — the first meaningful week-on-week increase after five consecutive weeks of reduction. Cost to borrow remains low at 0.38%, up a touch from the sub-0.29% prints seen earlier in the week, but nowhere near the 0.58% peak from mid-June. The borrow squeeze pressure that accompanied the earlier defensive wave has not returned.
The ORTEX short score has ticked up to 48.97 from 46.10 a week ago, reflecting the modest short-interest rebuild. That is a mid-range reading — not signalling extreme pressure in either direction — but the direction of travel over the past two sessions is worth watching. The score had been drifting lower through most of June as shorts covered; the uptick is new.
On the institutional side, the latest 13F filings (as of March 31) show Morgan Stanley added 11.1 million shares in Q1 — the largest addition among the top holders — bringing its position to 39.9 million shares, or 4.0% of the fund. Jane Street added 10.3 million shares over the same period, reaching 20.3 million. Wells Fargo moved the other way, trimming 11.6 million shares. These are Q1 positions and will not fully reflect the June volatility, but the pattern of dealer and market-maker accumulation at the top of the holder list is consistent with the ETF's role as a primary hedging vehicle.
The question heading into the rest of July is whether the current short rebuild is a tactical re-hedge after the holiday lull, or the start of a more sustained move back toward the 115-million-share levels seen in mid-June — and whether the options market, having unwound its defensiveness, follows the short sellers back in.
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