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Strategies & Market Trends : Underexposed Technical Analysis
AQN 5.875+0.6%3:59 PM EST
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To: Underexposed who wrote (416)8/13/2019 6:50:30 PM
From: Underexposed  Read Replies (1) of 914
 
DIS: Trying to still understand ETFs.... We'll look at ETFs by the numbers.

I am getting closer to really understanding the pricing of ETFs. They keep on talking about the NAV...Net Average Value...Which is the average value, calculated at 4.00pm from the closing prices of all the companies that are part of the ETF.

I seems that it should be close the the ETF closing price... if it is not then the Market price is adjusted???

This is not a bad discussion almost in English :)

Investopedia - ETF Net Asset Value vs. ETF Market Price: What's the Difference?

This is getting to the nut of it...

The redemption mechanism helps keep the market and NAV values in line. The AP can easily arbitrage any discrepancies between the market value and the NAV during the course of the trading day. The ETF shares' market value naturally fluctuates during the trading day. If the market value gets too high compared to the NAV, the AP can step in and buy the ETF's underlying constituent components while simultaneously selling ETF shares.

In the alternative, the AP can buy the ETF shares and sell the underlying components if the ETF market value gets too far below the NAV. These opportunities can provide a quick and relatively risk-free profit for the AP while also keeping the values close together. There may be multiple APs for an ETF, ensuring that more than one party can step into arbitrage away any price discrepancies.
So there we go..... If the share price of the ETF gets out of line with the NAV then there is a mechanism (the AP) to bring the values of the Market price in line with the average of the components of the ETF.

It is artificial and seems to be ongoing during the day... so the ETF is not going to run away or plummet on its own if the shares making up the ETF don't do so themselves... or at least not more so than the collective.

Makes sense I suppose....

So I've done some looking to find out how many choices there are in ETFs

Here are the numbers... quite amazing really.



Well... we are not starving for choice, are we? As we saw in the number of stocks, American stocks seem to gravitate to higher share prices.

But are all ETFs good buys.... further discussions will hopefully sort this out.

If you have suggestions of ETFs to look at ...please do so. It will give me some focus to concentrate on.... this is new territory for me.

UE
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