Options traders are aggressively buying calls on PPA, the Invesco Aerospace & Defense ETF, just as short sellers beat a rapid retreat. The put/call ratio has dropped to 0.22, nearly two standard deviations below its 20-day mean of 0.30. Short interest has simultaneously collapsed to record lows.
Short interest in PPA has fallen 55% over the past week to just 0.22% of free float, the lowest level on record for this ETF. A month ago, SI stood at around 0.29% of float. At these levels, the short position is negligible: fewer than 100,000 shares are currently borrowed against the fund.
The borrow market reflects this unwinding. Availability has surged to 1,632% of short interest, meaning roughly 16 shares sit available in the lending pool for every one currently borrowed. That is a dramatic loosening. As recently as 22 September, availability had tightened to just 30%, with every share in the lending pool fully lent out. The reversal since then has been swift and sharp.
The ORTEX short score has moved in lockstep. It sat at 48.5 on 22 September and has since fallen to 29.7, a near-halving over eight trading days.
While shorts exit, options traders are moving the other direction. The put/call ratio closed at 0.22 on 30 September, against a 20-day mean of 0.30 and a 52-week low of 0.14. The z-score of -2.0 marks this as statistically unusual call demand. For every put purchased, more than four calls changed hands.
Cost to borrow has ticked up 147% over the week to 1.05%, a curiosity given the collapse in short positioning. The most plausible explanation is timing: CTB can lag as lenders reprice a pool that briefly saw very tight availability in mid-September before the unwind.
PPA has fallen 9% over the past month, so the bullish options positioning runs against recent price action. The aerospace and defense sector backdrop remains supported by sustained government spending, but the fund is down 3% on the week. Whether the call buyers are positioned ahead of a defence budget catalyst or simply fading the recent sell-off, the convergence of a record-low short position and aggressive call buying marks an unusually one-sided posture from active traders in this ETF.
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