RIO Options Bet on Downside as Shorts Quietly Exit

RIO is sending mixed signals. Short sellers have been covering, yet options traders just placed the most bearish relative bet in months.

Shorts Cover, Bears Buy Puts

Short interest in Rio Tinto has fallen sharply. Estimated shares short dropped from 11.7M on July 9 to 10.2M by July 17 — a 12.5% decline in one week. The borrow market reflects this retreat. Availability stands at 1,870% of estimated short interest, the loosest conditions in months. Nearly 29.9M shares remain available to borrow with minimal competition. Cost to borrow sits at just 0.41% — low in absolute terms.

Short sellers appear to be taking the exit ramp.

Options Tell a Different Story

Monday's session flipped the narrative. RIO's put-call ratio jumped to 0.71. That is 2.2 standard deviations above the 20-day mean of 0.65. It is the highest PCR reading in at least the past month, and sits well above the 52-week low of 0.58.

Options traders are positioning for downside — even as the short lending market loosens.

This divergence is notable. Covering shorts and buying puts are both bearish-protective in nature, but they reflect different conviction levels and time horizons. Covering a short reduces an existing exposure. Buying puts opens new downside exposure.

What's Driving the Caution

The context helps explain the positioning. RIO has fallen 11% over the past month, closing at $89.07 on July 20. Analysts maintain an average price target of $105.48 — implying meaningful upside — but sentiment has cooled. JP Morgan downgraded to Neutral in March. Barclays moved to Equal-Weight the same month.

Forward earnings estimates are rising sharply. The 12-month forward EPS growth factor scores at the 76th percentile. But the short score sits at 34.1, down from 37 earlier this month, consistent with the covering trend.

Earnings arrive July 29. That date likely explains much of the put activity. Traders hedging a $89 position into a binary event will reach for puts. Recent earnings moves for RIO have been modest — the stock moved +2.6% and +4.2% on the two most recent prints.

Data Summary

• Shares short: 10.2M (July 17), down from 11.7M on July 9
• Borrow availability: 1,870% of SI — very loose
• Cost to borrow: 0.41%
• Put-call ratio: 0.71, z-score +2.23 vs 20-day mean
• Stock price: $89.07, down 11% over one month
• Next earnings: July 29, 2026
• Avg analyst target: $105.48