A quick note to those folks out there reading scary headlines
about ETFs "collapsing."
Today Brendan Conway committed what's an all-too-common error in
his blog, on surprised "crashes" in three ETNs:(NYSEArca:CHOC),
(NYSEArca:NINI) and (NYSEArca:CTNN), the iPath Pure Beta ETNs
tracking cocoa, nickel and cotton.
Most likely, he was looking at the "big movers" on a screen
somewhere, and noticed that, for instance, NINI was "trading at
$29.94, down $3.51." And indeed, that's what the screen shows:
Holy cats! The ETN had a 9.4 percent premium to its fair value
going into today!
Umm, well, no. What it had was a print so old it made the data
look like a mirage of unfair-value, ripe for arbitrage. I would say
that errors like this should be rare and easy to avoid, except that
not a day goes by when I don't read a headline about "premiums" and
"collapses" in thinly traded ETNs and ETPs, or get an email from
someone thinking they're either a genius or a fool.
The good news is that these kind of issues are entirely
Intraday net asset values, or iNAVs, are available for all ETNs
and ETFs, and you can simply match these against live, quoted bids
and asks. That's what tells you whether a fund is really at a
Oh, and NINI? It may be trading with enormous spreads of nearly
10 percent, but guess where those spreads are straddled over
today-and pretty much every day.
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