ISRG signals diverge: calls build as shorts pile in

Why this matters: Two days before the previous trader note called short sellers "in cautious retreat." That's changed. Short interest has jumped 14% in one week. Options traders and short sellers are now pointing in opposite directions — an unusual split ahead of October 20 earnings.

Shorts reverse course

Short interest in ISRG hit 2.31% of free float on September 24. That's up 12.5% in a single day and 14% over the week. The move reverses a month-long downtrend. From September 2 to September 16, short interest had steadily unwound from roughly 8.3 million shares to 7.2 million. It has now clawed back almost all of that ground, sitting at 8.19 million shares.

At 2.31% of float, this remains a low absolute level. But the pace matters. A 14% weekly acceleration on a stock up 4.2% over the same period suggests fresh short positions, not covering.

Options traders disagree

The put/call ratio sits at 0.78. That's 1.5 standard deviations below the 20-day mean of 0.83. Call-heavy positioning has been building since mid-September, when the PCR was running above 0.84. It has now compressed to near the 52-week low of 0.67.

Both signals have intensified in the past 48 hours. The divergence is real and sharp.

Borrow market remains open

Despite the short interest spike, the lending market is not tightening meaningfully. Availability stands at 7,879% — roughly 267 million shares available to borrow against around 8 million already short. That's an extraordinarily loose pool. Cost to borrow is 0.45%, up 14% week-on-week but still far below the 0.63% level seen in late August.

A rising CTB alongside rising short interest is worth watching. But with availability this deep, there is no borrow squeeze dynamic present yet.

October 20 is the focal point

Earnings are 25 days out. The July print was bruising — shares fell 11% the next day and 14.6% over the following week. Analysts cut targets hard afterward. The mean price target now stands at $476, against a current price of $399. That implies 19% upside per the consensus. Oppenheimer upgraded in August. BTIG reiterated Buy in September.

The market is dividing into two camps. Options traders are pricing upside. Short sellers are pricing risk. One of them will be wrong on October 20.

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• SI % FF: 2.31% (up 14% week-on-week)
• PCR: 0.78 (–1.5 SD from 20-day mean of 0.83; 52-week low: 0.67)
• Cost to borrow: 0.45% (+14% week-on-week)
• Availability: 7,879% — loose
• Stock price: $399.52, up 4.2% on the week
• Next earnings: October 20, 2026
• Analyst consensus: Hold; mean target $476