Options traders are piling into downside protection on VGK — even as short sellers retreat. The divergence tells two stories at once.
The put/call ratio hit 2.01 on April 29. That is the highest reading in over a year. The 20-day average sits at 1.49. A z-score of 2.45 signals this is far outside normal demand patterns.
In plain terms: for every call option bought, two puts were purchased. Options traders are paying up for protection against a European equity selloff, regardless of what short sellers are doing in the lending market.
Short interest has fallen sharply. SI dropped 26.5% over the past week to 1.98% of float. Over one month, it is down 15.4%. At under 2% of float, the absolute short position is not large.
What is notable is the borrow market behaviour alongside that retreat. Cost to borrow stands at 0.58% — up sharply from 0.24% on April 17. That spike earlier in the week coincided with heavy covering activity. When short sellers rush to return shares, temporary borrow squeezes can push CTB higher even as SI falls.
Availability remains in normal territory. With the lending pool not tight by historical standards, the CTB volatility reflects positioning churn rather than a structural shortage of borrowable shares.
Short sellers are leaving. Options traders are loading up on puts. These are not contradictory signals — they reflect different instruments, different time horizons, and different market participants.
Shorts may have covered because the trade worked. European equities rallied nearly 7% over the past month. VGK itself gained 7.2% in April before giving back 2.3% in the past week. Taking profits after a one-month move that size is rational.
Options buyers, however, are positioning for what comes next. A PCR z-score of 2.45 does not appear by accident. Macro uncertainty — tariffs, dollar moves, European growth concerns — is clearly driving demand for downside hedges on the region's largest US-listed ETF.
The ORTEX short score sits at 43.6, down from 48.3 two weeks ago. The trend in the score mirrors the covering activity: short pressure has eased.
What to watch: Whether the PCR normalises as macro clarity improves, or whether put demand continues to build even as the absolute short position stays low.
See the live data behind this article on ORTEX.
Open VGK on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data. Content is informational only and does not constitute investment advice.
