AAXJ has gained 5.6% in a week to $120.29, but options positioning tells a more cautious story beneath the rally.
The most striking data point this week is not the price move — it is how options traders have responded to it. The put/call ratio has jumped to 1.24, almost 2.75 standard deviations above its 20-day average of 0.93. That is the most defensive positioning seen on this ETF in months, suggesting a meaningful cohort of investors is buying downside protection even as the fund climbs. The shift is sharp and recent: through mid-September the PCR was running in a narrow 0.82–0.94 band before breaking higher over the last two sessions. Whether that reflects hedging from longs already in the trade or fresh bearish bets from investors skeptical of the rally's durability, the options market is clearly not celebrating the move unconditionally.
The lending picture, by contrast, has loosened dramatically — and that is the clearest evidence that the recent short-side conviction has faded. Borrow availability has surged to roughly 800% — meaning nearly eight shares are available to borrow for every one currently lent out. That is a complete reversal from early September, when availability dropped as low as 39%, one of the tightest readings of the past year. Short interest fell 56% in a single week and now accounts for just 1.2% of the free float, down from above 6% on September 9. Cost to borrow, which briefly climbed above 1.2% earlier this month, has eased back to 0.78%. The ORTEX short score has fallen from 63 to 32 over the same stretch — moving from a level that flagged elevated short-side pressure to one that is broadly neutral. Shorts that built aggressively through late August and early September have been covering into the rally.
The score retreat and short covering align with the broader price action, but the options skew introduces a genuine divergence worth watching. Shorts are exiting, borrow is loose, and the ETF is up sharply — yet put demand is running at its highest z-score in recent memory. One interpretation: investors already long the ETF are locking in gains with puts rather than selling outright. Another is that new money entering the trade wants protection against a reversal in China stimulus optimism or a resumption of currency pressure across the region. The 52-week PCR high of 1.73 shows there is room for this defensive positioning to deepen further.
The next test is whether the rally can sustain without a fresh macro catalyst. The ETF's broad multi-country mandate means performance stays sensitive to country-level shifts — particularly between China and India — and any deterioration in the China stimulus narrative would hit the fund's largest weighting directly. The divergence between a rapidly loosening lending market and an unusually defensive options posture is the setup to monitor in the sessions ahead.
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