Two Harbors Investment Corp. heads into its May 19 earnings call with short sellers in full retreat and options traders the most defensively positioned they've been all month — a split picture ahead of a print that already has a strong recent track record.
The most striking move in the data is the collapse in short interest. Shorts peaked at roughly 9.3% of free float in early April, at the height of macro volatility. They've been unwound aggressively since then. The position is now at 3.7% of float — less than half the April peak — with the bulk of the covering happening between April 23 and May 4. That's a rapid, sustained exit, not a short-term blip. FINRA's fortnightly data corroborates the picture: official short interest settled at around 3.7 million shares at the April 30 settlement, with days to cover under two sessions.
The borrow market confirms there's no pressure on remaining shorts. Cost to borrow runs at just 0.50% APR — cheap and stable. Availability in the lending pool is loose, and the ORTEX short score has eased from 37 at the start of the month to 35.2 now, placing the stock in roughly the middle of the universe on short conviction. There's nothing in the lending data that points to a crowded position or squeeze risk.
Options tell a different story. Put/call ratio sits at 1.69, running above its 20-day average of 1.52 and roughly 1.3 standard deviations elevated — the highest reading since early May. The PCR has been drifting steadily higher all month, accelerating from around 1.45 in late April to the current level. That's investors buying proportionally more downside protection into the earnings date, even as the stock itself gained 3.3% on the week and 14.9% over the past month to close at $12.66. Peers were notably weaker: fell nearly 14% on the week, while and were broadly flat. Two Harbors outperformed its mortgage REIT peer group by a wide margin.
The Street's positioning leans cautious on valuation. The analyst consensus is a hold, with JP Morgan the most recent mover — downgrading to Underweight in April with a $11.00 target, below the current price. The mean analyst target of $11.08 sits beneath where the stock is trading today at $12.66, implying the consensus view sees downside from here. The P/B multiple has expanded 15.6% over the past 30 days to 1.15x book, reflecting the strong price recovery, but that re-rating also puts the stock ahead of where analysts are comfortable. The dividend score ranks in the 81st percentile — a genuine strength for yield-focused holders — while the EPS momentum factor over the past 30 days is in the 90th percentile, a standout. Longer-term, 90-day EPS momentum drops to the 25th percentile, suggesting the recent beat was more isolated than a sustained trend.
The last earnings print, on April 29, delivered a one-day gain of 5.1% and a five-day move of 11.3%. The prior quarter showed a virtually identical pattern. That's two consecutive prints that produced strong positive reactions over the following week — a pattern worth noting as the May 19 call approaches. The bull case centers on an improving agency MBS book and a book value that has been nudging higher. Bears point to below-consensus EAD per share and the ever-present sensitivity to rate moves.
The next meaningful read on how the story develops comes in six days on May 19 — and the tension between a retreating short base, elevated put buying, and a stock already trading above consensus targets sets up an unusually charged setup going into that number.
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