SPY closed out the week at $750.59, up 2.3% over five sessions, but the options market is not buying the recovery with any conviction.
The put/call ratio spiked to 2.21 on Tuesday — more than 2.3 standard deviations above its 20-day mean of 1.97 — the most defensively skewed reading since the brief 2.40 peak in mid-May that marked the 52-week high. That reading is notable in its own right. What makes it worth dwelling on is the context: the ratio jumped on a day when the market barely moved. Demand for downside protection is running well ahead of any actual downside. Earlier in the week — Monday through Thursday — the ratio had been sitting quietly in its recent band around 1.89. Tuesday's surge was an isolated spike, not a creeping shift, and it has pushed the trailing z-score firmly above 2.0 for the week. The options market is hedging aggressively into what looks on the surface like a quiet grind higher.
The borrow picture tells a subtly different story, though it has shifted since the previous note. Availability has tightened further — running at just over 1,000% now versus the 1,140% reading cited two weeks ago and a peak of 2,596% in mid-May. At 1,024%, the lending pool remains very deep by any absolute standard, but the direction of travel is clearly tighter. Cost to borrow doubled between Friday and Tuesday, jumping from 0.21% to 0.43%. That is still very low in absolute terms, but the speed of the move — a 22% increase week-on-week — is worth flagging. It mirrors the broader tightening in availability and suggests that demand for borrows has picked up alongside the options hedging activity. Short interest itself has barely moved: 11.6% of the float, down roughly 2% from a month ago and essentially flat on the week. The short book is not building; it is the hedging overlay in derivatives that is doing the heavy lifting.
The ORTEX short score has crept up over the past two weeks, from 46.4 on May 13 to 48.6 now. That is still well inside the neutral zone — nothing approaching the elevated readings that would signal a structural re-positioning of shorts — but the direction is consistent with everything else: a slow accumulation of caution rather than outright conviction. Institutional ownership data from end-March shows JPMorgan, Morgan Stanley, and Goldman all added to positions in the quarter, with Morgan Stanley's addition of 11.1 million shares the standout. Jane Street added 10.3 million. Those are Q1 numbers and pre-date the recent volatility, but they establish that the largest holders were net buyers coming into the current period.
The borrow cost spike, the options skew, and the tightening availability have all moved in the same direction this week — each individually modest, collectively consistent. SPY is up 5% over the past month and trading near its best levels of the year, yet the hedging activity in options is running near a 52-week high. That divergence — between the price tape and the protective positioning underneath it — is the story heading into the final days of May.
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