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The most interesting thing about FDN this week is not where shorts are, but where they are going: out.
Short interest in the First Trust Dow Jones Internet Index Fund has been grinding lower for most of the past two weeks, and the broader picture confirms that bearish conviction here is thin. SI slipped to 1.55% of float, down 3.5% on the week and more or less tracking sideways in the low-to-mid 400,000-share range since early September. At that level, short interest is not a primary story. What is worth watching is the direction of travel: the one-month change is up 10.5%, suggesting a brief buildup through late September that is now being quietly reversed.
The lending market reinforces that picture. Availability has swung dramatically, from as tight as 10% of outstanding short interest in mid-September to roughly 1,549% now, meaning there are well over fifteen shares available to borrow for every one currently shorted. That is a very loose borrow, and the cost to borrow reflects it: the rate has eased to 1.97%, down about 16% on the week after a brief spike above 2.6% at the end of September. The September tightness was short-lived. The short score, an ORTEX composite that weighs these signals together, has dropped from 49 at the end of September to 33 this week, a meaningful shift toward neutral in a matter of days.
Options positioning adds another layer to the story, and here the signal diverges in an interesting way. The put/call ratio has fallen sharply from where it was sitting a month ago. For most of August and September, FDN's PCR ran above 3.5, and at points hit above 4. This week it has dropped to 2.75, nearly two standard deviations below its 20-day average of 3.44. That is a notable shift: options traders are showing considerably less demand for downside protection than they were through the late-summer period, even as the fund itself has climbed 3.2% on the week to $296.80. The 52-week PCR range runs from 0.20 to 5.07, so the current reading is nowhere near either extreme, but the direction of the move toward calls is clear.
Taken together, the positioning picture is one of sentiment improving rather than deteriorating. Shorts have trimmed, borrowing costs have come down from their September peak, availability is ample, and options traders are hedging less aggressively. FDN is up 2% on the month and 3.2% on the week, broadly consistent with the thaw in internet and high-multiple growth names that followed cooler inflation signals. The fund carries no analyst coverage or valuation multiples as an ETF, so the price is purely a function of its underlying basket.
The next thing to watch is whether the PCR compression holds as earnings season for the fund's largest internet holdings approaches, since any guidance surprises in that cohort would be the most direct catalyst for a reversal in the current positioning trend.
See the live data behind this article on ORTEX.
Open FDN on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data and reviewed by the ORTEX team. Content is informational only and does not constitute investment advice.
