UNG has done another about-face — the bear rebuild flagged in last week's note has largely unwound, with short interest dropping sharply and the lending market loosening to its most comfortable level in weeks.
The reversal in short positioning is the week's defining move. Short interest fell 18% week-on-week to 6.5% of the free float, pulling back from the 10.3% peak that characterised the July 14 spike covered in the previous note. In absolute shares, the position has shrunk from roughly 5.1 million to 3.2 million. That said, Tuesday brought a one-day jump of 15%, so the unwind isn't entirely clean — there's still choppiness underneath. The overall direction is a meaningful step back from the aggressive bearish rebuild seen over July 10–15.
The lending market tells the same story, but more emphatically. Availability has swung from around 55% a week ago — tight, with roughly one share available per two borrowed — to 249% today. That's a near-tripling of available supply relative to short interest in a matter of days, and it sits well above the mid-range that characterised most of June and early July. The 52-week minimum for availability hit 2.4%, so the market knows what genuine squeeze pressure looks like; current conditions are nowhere near that. Cost to borrow has eased in parallel, dropping 27% on the week to 2.07% — the lowest reading in the past month and a half. Borrow has not been this accessible since the quiet mid-June period.
Options positioning adds a notable counterpoint. The put/call ratio has climbed to 0.36, nearly three standard deviations above its 20-day average of 0.27 — the most defensively skewed reading the options market has produced in weeks. For context, the PCR spent most of June and early July hugging 0.25–0.27, making Monday and Tuesday's readings a sharp departure. That options traders are buying more downside protection even as short sellers retreat is a divergence worth noting. The two signals aren't necessarily contradictory — options hedges and short positions serve different purposes — but the caution in the options market suggests not everyone is convinced the bearish thesis is fully abandoned.
The ORTEX short score has also moderated alongside the SI decline, falling to 53.7 from peaks above 63 earlier in the month. That reading is still above neutral, reflecting that the ETF carries a non-trivial short base relative to its peers, but the directional move is softer. Institutional ownership data through March 31 shows Goldman Sachs as the largest holder at roughly 2% of shares, followed by market-makers Jump Trading and Virtu — a holder base that skews heavily toward trading desks rather than long-term conviction holders, consistent with UNG's role as a short-term tactical vehicle. The ETF is down 11% over the past month and 1.1% on the week, with Tuesday's 1.1% gain a modest partial recovery from the month's slide.
The next test is whether the options hedging is directionally correct or simply a temporary spike. Short interest has now swung meaningfully in both directions twice within a month — watch whether the 6.5% float reading holds or creeps back toward the 10% zone that proved short-lived twice already.
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