Arbitrage Keeps the Price Right
Another nuance unique to ETFs is the arbitrage opportunity that
serves to keep ETF market prices aligned with the value of their
underlying securities. Every time the ETF market price and the
value of the underlying securities start to diverge significantly
there is an opportunity for arbitrage. Seeing an opportunity
for profit from the price difference, authorized participants,
which include specialists and market makers, may either create
or redeem ETF shares.
For example, if the price of the underlying
stocks is below the price of the ETF, the authorized participant will buy the underlying securities and convert them to shares in
the ETF (while selling the ETF in the open market). If the underlying
stocks are priced above the ETF, the reverse will occur. Due to
the arbitrage opportunity and the fact that ETFs can be continuously
created and redeemed, the ETF market price and its NAV are
usually closely aligned.
ETFs are subject to risks similar to those of stocks and may not be suitable for
all investors. Investment returns and principal value will fluctuate so that when
shares are redeemed, they may be worth more or less than original cost.
Securities are not guaranteed by any bank, are not insured by the FDIC or any
other agency, and involve investment risks, including the possible loss of the principal
amount invested.
RydexShares are distributed by Rydex Distributors, Inc., an affiliate of Rydex Investments.
Rydex Investments 9601 Blackwell Road Suite 500 Rockville, MD 20850
800.820.0888 Send us your comments
For more complete information regarding Rydex funds, call 800.820.0888 or click here for a prospectus. Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. The fund's prospectus contains this and other information about the fund. Read the prospectus carefully before you invest or send money.
Key Points to Remember
ETF market price is determined by the price of underlying securities, market supply and demand forces
and arbitrage opportunities.
An ETF’s net asset value (NAV) represents the value of the ETF’s underlying
securities as of market close.
Intraday Indicative Value is updated every 15 seconds and represents the approximate NAV throughout the
day.
Investors may purchase shares
at a premium or discount to the NAV.
Print this page
Email this page
9601 Blackwell Road Suite 500 
ETF market price is