ETF Short Interest Drops
ETF Short Interest Plummets in May; Investors Urged to Reassess Yields and Strategies
Anonymous
Key Points
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Schwab U.S. TIPS ETF (SCHP) reported short interest of 761,856 shares as of May 29—down 87.9% from 6,294,949 shares as of May 14. The article also put SCHP’s short interest at 0.1% of shares sold short and a short-interest ratio of 0.2 days.
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FlexShares iBoxx 3 Year Target Duration TIPS Index Fund (TDTT) showed short interest of 13,751 shares as of May 29, down 82.0% from 76,556 shares as of May 14. The same report said approximately 0.0% of shares were sold short and cited a short-interest ratio of 0.1 days.
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Touchstone Securitized Income ETF (TSEC) had short interest of 12,465 shares as of May 29—down 81.4% from 66,964 shares as of May 14. The article also reported a short-interest ratio of 0.8 days and noted JPMorgan Chase & Co. raised its position by 604.3% (to 13,480 shares).
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Roundhill’s 0DTE covered-call structure includes timing and strike specifics: the funds maintain overnight exposure via synthetic exposure, then “each morning” sell an “out-of-the-money 0DTE call option” that expires the same day at market close—aiming to harvest rapid theta but accepting the tradeoff of reduced upside if the market rallies sharply during the day.
Short sellers fled the Schwab U.S. TIPS ETF in May, with short interest collapsing 87.9% — from 6,294,949 shares on May 14 to just 761,856 shares by May 29, according to Watchlist News. The retreat left only 0.1% of SCHP shares sold short and a short-interest ratio of just 0.2 days.
The drop was not isolated. Two other fixed-income ETFs saw short interest fall more than 80% over the same two-week window. The wave of short covering points to a sharp reversal in bearish bets against inflation-protected and securitized bond funds.
Three TIPS and Securitized ETFs Shed Bearish Bets Fast
FlexShares iBoxx 3 Year Target Duration TIPS Index Fund (TDTT) saw short interest drop 82.0%, falling from 76,556 shares to just 13,751 shares between May 14 and May 29. Its short-interest ratio hit a razor-thin 0.1 days, meaning shorts could cover their entire position in a fraction of a trading session.
Touchstone Securitized Income ETF (TSEC) followed a similar path, with short interest falling 81.4% — from 66,964 shares to 12,465 shares — over the same period, per Ticker Report. TSEC's short-interest ratio stood at 0.8 days. All three funds now carry minimal bearish positioning in absolute terms.
JPMorgan Makes a Big Move Into Securitized Income
While short sellers were exiting TSEC, at least one major institution was stepping in. JPMorgan Chase & Co. raised its position in the Touchstone Securitized Income ETF by 604.3%, bringing its stake to 13,480 shares, according to Ticker Report.
The move signals that large institutional investors may be shifting into securitized debt — bonds backed by mortgages and other assets — as an alternative to corporate credit. Short interest across all three funds remains small enough that a dramatic short squeeze is unlikely, but the direction of positioning is clearly bullish.
Roundhill's 0DTE ETFs Offer Big Yields With Real Tradeoffs
Separate from the short-interest story, two Roundhill ETFs are drawing attention for their eye-catching weekly payouts. QDTE, the Roundhill Innovation-100 0DTE Covered Call ETF, carries an annualized distribution rate of 40.27%. Its S&P 500 sibling, XDTE, yields 25.69% annualized, according to 247 Wall St.
Both funds use the same basic structure. They hold overnight exposure to their index through synthetic positions — meaning Treasury collateral plus derivatives rather than direct stock ownership. Each morning, they sell an out-of-the-money 0DTE call option, one that expires at the market close that same day. The goal is to collect rapid time decay, known as theta. The tradeoff: if the market rallies sharply during the day, the fund's gains are capped at the strike price.
High Yield Numbers Can Hide the Full Picture
Investors drawn to these funds by headline yields should understand one key mechanic. When a fund pays a distribution, its net asset value — the per-share price — drops by the same amount on the ex-dividend date. A big payout does not mean a free gain. Total return, not yield alone, is what matters.
Recent distributions from QDTE and XDTE have been classified as "return of capital," per Form 19a-1 filings. That means some payouts are simply returning investors' own money rather than earned income. Critics compare daily call-selling to "picking up pennies in front of a steamroller" — fine in calm markets, but costly when the index surges. Investors should weigh total return alongside any headline yield before buying.
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