Diageo's lending market and options desk are sending opposing signals. The borrow pool is nearly tapped out. Yet call positioning just hit a 52-week extreme in the bullish direction.
Availability on DEO has dropped to just 2.5% — meaning for every 40 shares already borrowed short, only one remains available to lend. That is near the tightest level recorded over the past 52 weeks; availability hit as low as 0.7% on May 14.
This tightening has not gone unpriced. Cost to borrow stood at 1.52% as of May 15. That is up 105% over the past month. A month ago the borrow rate sat below 0.75%.
Short interest itself has been moving in the opposite direction to borrow costs. Estimated short shares fell 13% over the past week to roughly 3.9 million. The number of shares being borrowed is shrinking even as the cost to borrow those shares doubles. That divergence — fewer shorts but dramatically tighter availability — suggests the lending pool itself has contracted, not that new demand is flooding in.
The put/call ratio hit 0.61 on May 18. The 20-day average is 0.646. The current reading sits at a 2-standard-deviation low on a z-score basis — the most call-skewed positioning seen all year, and close to the 52-week low for the ratio of 0.59.
One month ago the PCR was above 0.92. The shift is sustained, not a one-day spike. Traders have been steadily rotating from protective puts toward calls throughout May.
The stock has followed. DEO is up 2.6% on the day and 2.2% on the week, trading at $83.78.
Short sellers are covering — or at minimum, not adding — even as the borrow market remains extremely tight. At the same time, options positioning has swung sharply bullish. Both point in the same direction for the stock in the near term, even if they arise from different dynamics.
The ORTEX short score sits at 48.2, mid-range, reflecting the mix of signals. Next earnings are scheduled for August 6.
Data summary
See the live data behind this article on ORTEX.
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