XOP shorts ease but put-heavy options keep the bearish tone intact

XOP, the SPDR S&P Oil & Gas Exploration & Production ETF, has spent the past two weeks unwinding what had been an unusually compressed borrow market, yet options traders remain firmly defensive, creating an interesting split in how the market is leaning heading into November.

The lending picture has shifted materially in favour of bearish shorts finding it easier, not harder, to operate. Availability has jumped to 221%, more than double the level it sat at a week ago (102%) and dramatically above the mid-October low of around 9.5%, when the lending pool was essentially tapped out. At the same time, borrowing costs have dropped 24% over the week to 1.60%, well below where they were through most of October. Short interest itself has pulled back roughly 11% from the late-September peak of around 15 million shares, landing at just under 13 million shares. Taken together, this is a market where the pressure on existing shorts has eased considerably: more shares are available to borrow, the cost of holding those positions is lower, and some of the most aggressive bears have trimmed. The ORTEX short score, which earlier in October was pushing above 74, has dropped to 66.4, consistent with that modest de-escalation.

Options positioning tells a different story, though. Puts remain heavily favoured over calls, with the put/call ratio at 2.35, almost exactly in line with its 20-day average of 2.35, and well above the 52-week low of 0.83. The ratio has actually ticked up from the 2.10 to 2.20 range that prevailed in late October, suggesting that as some short sellers trimmed, options traders filled in the bearish demand. The 52-week high on the PCR sits at 4.14, so the current level is not at an extreme, but it reflects a market that has sustained heavy put demand for weeks and shows no sign of rotating toward calls.

The price backdrop reinforces the cautious read. XOP fell 4.2% over the past week to $191.52, giving back some of the 3.6% gain posted over the prior month. The ETF has no upcoming earnings event of its own, which means the catalyst set remains macro: crude oil prices, production data from the underlying E&P names, and broader energy sector sentiment. Goldman Sachs holds the largest disclosed institutional stake at roughly 17.5% as of September 30, unchanged, while Mirae Asset Securities added a fresh 650,000-share position in the same quarter. Invesco, which held 5.6% as recently as May, disclosed a full exit in an August 13G/A amendment, a notable departure from a fund that had been a meaningful holder.

Historically, the events recorded as "earnings" for XOP are quarterly distribution and rebalance-related filings, not corporate earnings prints. The three most recent episodes, in September 2026, September 2025, and September 2024, produced one-day moves of +0.82%, -0.47%, and -2.17% respectively, with the five-day drift tracking closely to the one-day direction each time. The pattern is too thin to draw firm conclusions, but it does suggest XOP's reaction around those dates has been modest rather than sharp.

The key variable to watch is whether availability continues to loosen or reverts toward the tight conditions seen in mid-October. The sharp swing from near-zero availability to 221% in the space of two weeks reflects how quickly the lending market in an ETF can move; the direction it takes from here will say more about where the informed short base is heading than the PCR, which has been in a narrow range for several weeks.