Oil prices are rebounding on Thursday, but investors in a popular oil-trackingexchange-traded note are missing out on the gains.

The iPath S&P GSCI Crude Oil Total Return Index ETN ( OIL) is down 13% even as other oil exchange-traded products like the United States Oil Fund( USO) and United States Brent Oil Fund( BNO) rose about 4%.

A sharp performance divergence stems from the ETN’s massive price premiumover the value of the index it tracks.

Pravit Chintawongvanich, head derivatives strategist atMacro Risk Advisors, notes that OIL’s premium rose sharply in recent days and accelerated to 48% by Wednesday’s close (see chart). He told Barron’s that institutional traders noticed the extreme premium and are now betting against OIL on the premise that the unusually large premium will revert to normal. Trading volume in OIL was already more than triple the average over the past month on Thursday with three hours left in the trading day.

Even after today’s drop, OIL is still at a roughly 20% premium to its underlying index.Chintawongvanich says that it’s not too late for investors who own OIL to ditch it for USO: “You don’t want to be stuck holding the bag when this drops to NAV.”

This blogger has made the case that index-tracking stock ETFs such as the Energy Select SPDR ETF ( XLE) are the best way for long-term investors to speculate on an eventual rebound in oil prices.

Traders may remember that a similar situation cropped up in the VelocityShares Daily 2x VIX Short-Term ETN ( TVIX) in 2012. Back then, the ETN stopped tracking its underlying index when it reached a pre-set limit of shares outstanding. Since creating and retiring shares is the grease with which arbitrageurs keep the wheels spinning, TVIX rose to a premium of as much as 89% before plunging violently after the issuing bank announced that it would reopen issuance.