Itaú Unibanco is sending a mixed signal this week. Short sellers are covering fast. But options traders are bracing for more downside.
The divergence is sharp enough to warrant attention.
Short interest in ITUB has collapsed 35.6% in one week, falling to 14.8M shares as of May 13 from a peak of 22.9M on May 5. That's the fastest week-on-week retreat in the past 30 days of data.
The timing is notable. ITUB reported earnings on May 6 and the stock dropped 4.6% that day. It has since fallen a further 3.1% in a single session, bringing the one-month loss to 14.3%.
Short sellers appear to be taking profits from a well-timed position — not opening new ones.
While shorts cover, the options market is tilting bearish. The put/call ratio jumped to 1.05 on May 13. That's 2.38 standard deviations above the 20-day mean of 0.85.
Demand for downside protection spiked on the same day the stock fell 3.1%. That's not coincidence. Investors are buying puts to hedge — or to bet — against further weakness.
Here's the odd twist: cost to borrow doubled in a week. CTB hit 0.58% on May 13, up 105% from 0.28% seven days earlier.
That's unusual when short interest is falling. It may reflect fewer lendable shares in the float, or a shift in the composition of remaining short positions toward harder-to-borrow share classes. Availability remains relatively loose in absolute terms, but the direction of the move warrants watching.
JP Morgan maintained its Overweight rating in February and raised its price target to $9.00. The stock now trades at $7.85. That gap has widened considerably since the May earnings drop.
The broader consensus sits at Hold, with just two covering analysts. BlackRock added 33M shares in its most recent filing, a meaningful build for a stock under this kind of pressure.
The next earnings date is August 4. Between now and then, the key questions are whether put volume normalises as the stock stabilises, and whether borrow costs continue to climb even as shorts reduce exposure — a pattern that could signal something structural in the lending market rather than simple profit-taking.
Data summary
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