In the latest chapter of the United States Natural Gas ETF(UNG Quote) saga, the fund has begun to trade at a noticeable premium to its actual value, forcing investors to "pay up" to get a hold of shares.
UNG closed at a 2.56% premium to net asset value (NAV). This predictable move is a result of a regulatory hang-up in the fund's creation process that defines the very nature of ETFs.
Unlike mutual funds or closed end funds, ETFs have a transparent portfolio. Each day, investors can find out exactly what is in the basket of stocks that make up each fund. Baskets generally include securities or futures and a cash amount. The price of an ETF should be close to its NAV, since it is possible to determine what the fund is worth while the contents of its basket are trading. ...
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