Short sellers in EWU — the iShares MSCI United Kingdom ETF — have spent the past month reducing exposure, yet options traders are still reaching for downside protection at a pace well above historical norms. That divergence is the defining tension in the fund heading into the second week of May.
The borrow-and-positioning picture is cleaner than it looks on the surface. Short interest peaked around 7–8% of the float in late March and early April, when tariff fears were at their most acute. Since then, shorts have retreated sharply — down roughly 21% over the past month — settling at 5.4% of free float as of May 5th. This week alone, however, that compression reversed course: short interest has risen 8.6%, adding back a chunk of what was unwound. The rebound is modest in absolute terms but signals fresh demand for borrows just as the broader unwind appeared complete. The lending market itself is not particularly strained. Availability is wide — the 52-week utilisation peak was 44.3%, against a current reading closer to 5.7% — so there is ample borrow supply for new shorts if conviction builds. Cost to borrow ticked up to 3.3% annualised, about 15% below where it was a week ago and broadly in line with the range it has traded all spring. Neither the availability picture nor the cost signal screams squeeze pressure.
The put/call ratio tells a notably different story. At 4.12 on May 5th, it is running well above its 20-day average of 3.28, and it has remained elevated since late April when it briefly touched the 52-week high of 4.75. For context, EWU's options market spent the bulk of January through mid-April with a PCR hovering around 1.5 — the jump above 4.0 in the third week of April was sharp and has not fully unwound. The z-score of 0.58 relative to the 20-day mean is not extreme, but the absolute level of put-heavy positioning is persistently high relative to the fund's own history. That suggests hedging demand is structural over this period, not just a one-day spike.
The macro backdrop helps explain why. UK ETF fund flows have been modestly positive over the past month — with around $615 million in net inflows across UK-focused funds — but the broader Developed Europe category is seeing meaningful outflows, losing over $5 billion on a net basis. EWU sits in a category where allocators are still reducing. The fund itself is up about 0.5% over the past month and essentially flat on the week at $46.45, a performance profile that reflects resilience rather than momentum. BlackRock remains the dominant institutional holder with an 18% stake — and notably increased its position by over 7 million shares as of the latest March filing — while other institutional holders including Goldman Sachs Wealth and Morgan Stanley show smaller or unchanged positions.
The short score from ORTEX has been trending gradually lower through April, easing from 38.4 on April 22nd to 37.3 on May 5th. A score around 37 is not elevated — it points to a fund where positioning is watched but not stretched. The uptick in short interest this week is worth monitoring given the score has barely budged in response, suggesting the incremental borrow demand has not yet been significant enough to register as a shift in overall conviction.
What to watch next: whether the elevated put-call ratio normalises toward the 1.5–2.0 range that characterised EWU options through the first quarter, or whether continued macro uncertainty around UK trade policy and sterling keeps defensive hedging structurally above its long-run baseline.
See the live data behind this article on ORTEX.
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