USO fell nearly 11% on the week to $144.08, and the lending market has snapped shut again — availability has dropped back to just 0.82%, putting the fund in one of its tightest borrow conditions of the past year.
The covering trend that defined the prior week's note has reversed. Short interest has climbed back to 74.8% of the free float — up 5.4% over the past week — after the sharp retreat from mid-August highs near 14 million shares shorted. The direction has flipped: bears are rebuilding, not retreating. The ORTEX short score holds at 70.9, essentially unchanged from the 70.5 reading reported a week ago, confirming that the broader bearish positioning structure never fully unwound. What has changed is the lending market. Availability has collapsed from 22% on September 18 back to 0.82% — every share in the lending pool is effectively lent out. The last time availability hit zero was September 8, the peak of the squeeze episode. It is back there now.
The cost to borrow tells a more nuanced story than the headline availability reading. At 7.1%, borrowing costs are elevated — up 23% over the week and more than 150% above their August levels — but they are nowhere near the 52.9% peak hit on September 8. That spike reflected an acute dislocation when availability went to zero and new borrowers faced emergency rates. The current reading at 7.1% suggests the pool is locked but not disorderly: existing shorts are sitting on positions they took out at lower rates, while fresh shorts face a genuine cost barrier. The gap between near-zero availability and a still-manageable borrow rate is the central tension in the lending market right now.
Options positioning has turned more defensive than at any point in the past several weeks. The put/call ratio hit 1.54 Monday and has held above 1.50 for four consecutive sessions — well above its 20-day average of 1.34. That puts the current reading roughly 1.3 standard deviations above recent norms, the most stretched put-heavy setup since the fund's 52-week high PCR of 2.53. That extreme was hit on August 24, the day short interest peaked above 14 million shares. The current setup is not as extreme, but the direction of travel in options skew mirrors the rebuilding in short positions: investors are paying more for downside protection as crude prices retrace the month's gains.
The institutional holder base reflects how unusual USO's positioning has become. Goldman Sachs held 45% of reported shares as of June 30 — almost certainly a mix of market-making and ETF arbitrage activity rather than directional conviction. Morgan Stanley added 1.1 million shares in Q2, bringing its stake to 21.6% of reported holdings. The activity from HRT Financial, which filed as a 10% owner, shows the high-frequency nature of positioning around this fund: the firm was simultaneously buying roughly $6.8 million and selling roughly $2.7 million in open-market transactions on September 16 alone. These are not directional bets — they are the fingerprints of an arbitrage operation managing ETF creation and redemption. The net 90-day insider position of +53,480 shares worth $8.6 million is therefore less informative as a sentiment signal than it would be for an operating company.
What to watch: availability and cost to borrow are the two live gauges — whether availability remains near zero through the week, or opens back up as it did briefly on September 18, will determine whether the current borrow squeeze deepens or resolves, and whether the put-heavy options skew holds or fades as the crude tape settles.
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