Etf premium rate refers to the situation that the OTC price of etf fund is higher than the OTC net value of etf fund. Conversely, when the OTC price of etf fund is lower than the OTC net value of etf fund, it will lead to etf discount rate. Investors can use etf funds to carry out premium arbitrage or discount arbitrage between the two markets. That's what etf premium rate means.

Introduction of premium arbitrage and discount arbitrage

1. premium arbitrage: when the secondary market price is higher than the net value, investors will buy a basket of stocks from the secondary market, then convert them into etf fund market share according to the net value in the primary market, and then sell ETFs at high prices in the secondary market for arbitrage;

2. Discount arbitrage: When the secondary market price is less than the net value, investors buy the market share of etf funds at a low price in the secondary market, then redeem the market share in the primary market according to the net value, and then sell the share in the secondary market for arbitrage.

It should be noted that investors use the difference between the on-site price and the off-site net value of etf funds to arbitrage, and the profits they get must exceed the transaction cost, otherwise they cannot make a profit. This paper mainly writes about the knowledge points about what etf premium rate means, and the content is for reference only.