Premiums and Discounts

ETFs are similar to mutual funds in that they hold a mix of stocks or bonds, but unlike mutual funds you can buy and sell them throughout the day. This flexibility means you can immediately act on global news whenever the market is open. It’s also why there are a few extra terms used when talking about ETFs.

Price, NAV, Premiums and Discounts

  • Market Price
    This is the price you can buy or sell the fund on an exchange.
  • Net Asset Value (NAV)
    The NAV of an ETF is the sum of net assets less any liabilities divided by shares outstanding.
  • Premium
    If an ETF’s market price exceeds its NAV, the ETF is trading at a premium.
  • Discount
    The ETF is trading at a discount if the ETF’s market price is below the NAV.

How Everything Works Together

Because ETFs can be traded through the day, you can use ETFs to act on the information even when markets for the underlying securities are closed. For example:

  • For international equities, the prices in calculated NAVs can be "stale" (i.e., not reflecting events that occurred after local market hours) during US trading hours because local markets are closed. International ETFs trading in the US market tend to reflect the real-time value of the equities during US market hours.
  • During slow-moving market conditions, ETF prices and NAVs typically stay closely related. During more volatile conditions and rapid news cycles, the market price can change quickly but the NAVs may be slower to adjust, resulting in more sizable premiums and discounts.

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ETFs Reflect Market Sentiment

It's not uncommon to see spikes in ETF trading when the broader market is more tumultuous, but that's not because of ETFs.

Learn more about correlations

ETFs and Securities Lending

Securities lending is a well-established practice where ETFs make short-term loans to large financial institutions.

Learn more about securities lending

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained visiting the iShares ETF prospectus pages. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

Investing involves risk including loss of principal. The opinions presented are those of Kate Moore, Chief Equity Strategist, as of September 9th, 2016 and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or made investment decisions that may, in certain respects, not be consistent with the information contained in this presentation. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this presentation are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the viewer.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

©2017 BlackRock, Inc. All Rights Reserved. BLACKROCK, BLACKROCK SOLUTIONS and iSHARES are registered trademarks of BlackRock, Inc. All other trademarks are those of their respective owners.

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