Interactive lab
ETF Creation/Redemption
A companion to the How an ETF's Price Stays Tied to Its Holdings lesson in the How ETFs Work track.
Interactive walkthrough
How Creation/Redemption Keeps an ETF's Price Honest
Gap opens
AP notices
Basket → shares
Shares sold
Gap closes
1. The ETF's market price drifts above its holdings' value
Ordinary buying and selling on the exchange pushes the ETF's share price above the actual value of the assets it holds — a "premium." Nothing about the underlying holdings has changed; only the trading price has moved.
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