EXE shorts keep climbing, but options traders are buying calls

Expand Energy Corporation, the natural gas producer formed from the merger of Chesapeake Energy and Southwestern Energy, reports Q3 results on October 28 against a backdrop of sharply rising short interest and an options market that refuses to agree with the bears.

Short positions have now reached 5.25% of the free float, up 41% over the past month and 17% over the past week alone. Since yesterday's ORTEX article noted the one-year high at 4.8%, the number has moved higher still, with 12.5 million shares now borrowed. The pace of accumulation has been consistent: the position has grown in almost every session since mid-September. Yet the lending market tells a different story about conviction. Cost to borrow is just 0.44%, and availability remains at roughly 1,170%, meaning around twelve shares are available to lend for every one borrowed. Short sellers have expanded positions aggressively, but they are doing so in a market that offers no scarcity premium on the borrow.

Options traders are pointing in the opposite direction. The put/call ratio has dropped to 0.79, more than 2.5 standard deviations below its 20-day average of 1.00. That is the lowest reading of the past year, with the 52-week low sitting at 0.72. Call volume has overwhelmed put buying for two consecutive sessions now, a notable shift from the October average above 1.04. The stock is up 8.9% over the past month and 2.1% over the past week, modest relative to some peers: RRC jumped 23.9% on the week and AR gained 7.0%, suggesting EXE has lagged the broader natural gas producer rally.

On the analyst side, the direction of travel has been uniformly downward on price targets, though not on ratings. Morgan Stanley trimmed its target to $124 from $129 on October 15 while keeping Overweight, and UBS cut to $120 from $122 on the same day, also retaining Buy. Earlier in October, Bernstein made a more meaningful cut from $160 to $127. Across the board, firms have held positive ratings while marking down their numbers, arriving at a consensus mean target of $123, roughly 30% above the current price of $94.62. The bull case rests on production growth of 15% year-over-year and well productivity running 40% above basin averages. The bear case centres on projected production softness in early 2026 and the risk that prolonged low natural gas prices, constrained by pipeline capacity, compress cash flows before the growth thesis pays out. Valuation sits at a trailing EV/EBITDA of 4.5x and a P/E around 10x, modest enough that the Street has not needed to abandon the positive view despite trimming targets.

The Q3 print will test whether production volumes and cash flow meet the expectations that kept all those Buy and Overweight ratings in place through a month of falling price targets, and whether the call buyers who crowded into the options market on the day of the release had the better read on the quarter than the short sellers who spent October adding to their positions.