FDN, the First Trust Dow Jones Internet Index Fund, enters the week with a quietly shifting set of signals — options positioning is softening from historically defensive levels while the borrow market has tightened sharply, making the current setup more interesting than the muted price action suggests.
The most striking story this week is the collapse in borrow availability. After spending much of August with availability comfortably above 500% — effectively a loose lending market — availability has tightened to 156% from 385% just a week ago. That is a 59% drop in seven days. The 52-week low sits at 10%, so there is room to run tighter, but the pace of the move demands attention. Cost to borrow has more than doubled week-on-week to 1.66%, recovering from an unusually soft reading of 0.80% on September 8. Short interest itself is modest at 1.4% of the free float — barely moved on the week — so this is not a crowded short. The availability tightening points to increased demand for borrows against a relatively thin lending pool, not a conviction short-selling campaign.
Options positioning tells the opposite story, and the contrast matters. FDN's put/call ratio has been running at elevated levels for months — the 20-day average is 4.03, among the most put-heavy readings in the market for any equity product. But the current PCR of 3.73 is actually below that average. The z-score of -0.99 places this week's reading nearly one standard deviation below the norm, meaning options traders are less defensively positioned than usual. The 52-week PCR range of 0.20 to 5.07 gives that context: the ratio has trended down consistently from the 4.5-4.6 range that dominated mid-August. That is a material unwind of hedging pressure, happening in parallel with borrow tightening — two signals pointing in different directions simultaneously.
The ORTEX short score of 46.3 has been climbing steadily this week, up from 36.4 on September 4. That move reflects the tightening borrow conditions and the week-on-week cost-to-borrow jump rather than any spike in short interest itself. At 46, the score sits near the middle of the range — not a high-conviction short signal, but the direction of travel is worth tracking given how quickly the borrow environment shifted.
Price action has been broadly flat, with FDN up 0.8% on the week and off 0.5% over the past month, closing at $289.90. A recent note flagged improved tech sentiment last Friday, with the fund climbing 1.8% to a three-month high on cooling inflation expectations. That move appears to have drawn incremental demand for downside protection through the borrow market even as options traders pulled back their hedges — an unusual divergence between the two positioning channels.
What to watch next is whether the borrow availability continues compressing toward the tighter end of its recent range, and whether the PCR mean-reverts higher as the September options cycle rolls off.
See the live data behind this article on ORTEX.
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