generally trade close to their fair value, and premiums or discounts tend to be short-lived. Read more, premium Digital, all the essentials plus deeper insights and analysis, all the benefits of Digital plus: Lex our agenda setting daily column. Distribution.00 per share. NAV falls and share price rises: The investment portfolio is heading south but at least you are making some money. Discounts and premiums wax and wane over time. In-depth analysis on trade, emerging markets, M A, investing and more ePaper a digital replica of the newspaper. There may be a good reason why it is trading at a discount. If optimistic investors start aggressively bidding up discount holidays an ETFmore so than its underlying securitiesthe price of the ETF may rise faster than the price of its underlying securities and, consequently, may trade at a premium. Absolute discounts, the standard thinking for CEFs is to focus on funds trading at discounts and to avoid funds trading at premiums. The calculation is (Share price NAV).
The unstated premise is that eventually the price will reach.00. Discounts and premiums are usually calculated using the official last close price. You may want to consider taking your profits and finding a more suitable investment. Alternatively, premiums or discounts may arise because the ETF and its underlying securities trade on exchanges that are in different time zones. Recent changes in distribution policy, an asset class or investment strategy falling out of market favor. Of the nine scenarios, this occurs in only half of one (because the NAV could rise faster than an increasing share price, meaning the discount would widen). Furthermore, the NAV could decline.85 (or lower). Shares are said to trade at a "premium" when the share price is higher than the NAV. Past performance is no guarantee of future results. How the absolute discount can narrow. "Yield enhancement" and absolute discounts, putting aside sources of distribution, let's assume that a fund's underlying portfolio at NAV yields. Absolute discounts are an inappropriate method of finding undervalued CEFs.
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