FDN, the First Trust Dow Jones Internet Index Fund, is telling two stories this week — a fund that has quietly rallied 11% over the past month while options traders rapidly unwind the defensive positioning that defined most of August.
The options signal is the standout. Put/call ratio has dropped sharply to 4.20, nearly two and a half standard deviations below its 20-day average of 4.58 — the least defensive options reading in roughly six weeks. That is a meaningful shift. Through most of August, the PCR held above 4.55, reflecting persistent demand for downside protection in the fund. Now it is falling fast, consistent with the 1.3% weekly price gain and a month that has added nearly $31 to the share price. The 52-week PCR range runs from 0.20 to 5.07, so the current reading is still put-heavy in absolute terms — but the direction of travel has clearly changed.
The lending market remains relaxed, and that story is broadly consistent with the note published here on August 19. Short interest has continued to drift higher, now at 1.43% of float — up another 9% on the week and 128% over the past month — but the absolute level stays low, and borrow conditions are not stressed. Availability has actually loosened considerably, widening to 540% from around 176% a week ago, meaning more than five shares sit idle in the lending pool for every one already borrowed. Cost to borrow has eased roughly 15% on the week to 2.85%, pulling back from the 3.36%–3.86% range that prevailed through much of the month. The short score has also retreated — falling to 37.0 from a recent peak near 49 on August 14 — reinforcing that whatever short-side conviction existed earlier in August has faded. The borrow market reads loose rather than pressured.
The price action ties these threads together. FDN's 11% monthly gain reflects the broader recovery in large-cap internet names after the August 14 peak in short positioning. The fund carries no meaningful earnings catalyst of its own, so the price move is a function of what happens across its underlying holdings — names that were under pressure from analyst downgrades and macro caution through much of the summer. The short score's slide from the mid-40s to the high-30s tracks the price recovery almost precisely, suggesting that the hedges being rebuilt in the first half of August are now being partially unwound alongside the rally.
What to watch next is whether the PCR normalisation continues toward the lower end of its recent range, or whether the still-elevated put-to-call ratio firms back up if the underlying internet names face renewed selling pressure at current valuation levels.
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