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Options traders are leaning hard into calls on MFA Financial even as short sellers build positions at the fastest pace in months. The two camps are pointing in opposite directions, and the gap between them widened sharply this week.
The put-call ratio for MFA fell to 0.86 on 6 October, 3.4 standard deviations below its 20-day mean of 1.39. For a mortgage REIT that has spent most of the past year with more puts than calls outstanding, that is a striking shift. The 52-week range runs from 0.57 to 1.70, so the reading is not at an all-time low, but the speed of the move from the mean is what stands out.
Options buyers leaning toward calls are likely pricing in a rebound from a punishing month. MFA shares are down 18.7% over the past 30 days and closed at $7.28 on 6 October, a deep discount to book value of roughly $12.71 per share.
Short interest climbed to 6.3% of free float as of 5 October, up 15.5% in one week and 45.4% over the past month. That one-month pace is the most sustained build since data collection began on this name.
Cost to borrow has followed the demand higher. It reached 0.89% on 5 October, up 81% in a week and more than double the level from a month ago. Even so, borrow availability remains ample at around 200%, meaning roughly two shares are available to lend for every one already borrowed. The lending market is tightening but not squeezed.
The ORTEX short score reached 56.2 on 5 October, up from 48.8 a week earlier. The score has moved nearly eight points in ten sessions.
BTIG analyst Douglas Harter lowered his price target on MFA to $9.50 from $10.50 this morning, while maintaining a Buy rating. That target still implies roughly 30% upside from Tuesday's close. Citizens has a $11.00 target, also above current levels.
The bear case is concrete. Distributable earnings per share of $0.12 in the second quarter missed the $0.15 estimate and fell well short of the $0.25 consensus. Net interest spread compressed to 1.56% from 1.64% the prior quarter. Asset yields declined to 5.96%. With earnings due 6 November, the gap between the dividend and distributable earnings is the number bears are focused on.
The bull case rests on book value resilience, improving delinquencies (60-plus day delinquencies fell to 7.0%), and Lima One's $316 million of second-quarter originations. BlackRock added 281,347 shares as of 30 September, its largest disclosed position in the name.
See the live data behind this article on ORTEX.
Open MFA on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data and reviewed by the ORTEX team. Content is informational only and does not constitute investment advice.
