Premium Definition

Learn the definition of premium and other ETF terminology from the etf.com glossary.

ETF
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff

Learn more about Premiums

A Premium in the context of ETFs materializes when the market price of the ETF's shares surpasses the Net Asset Value (NAV) per share. This phenomenon often occurs due to increased demand, causing scarcity in available shares. Investors purchasing ETF shares at a premium may experience a higher cost, reflecting the market's enthusiasm for the fund. While premiums can present challenges, they also indicate robust investor interest, potentially leading to increased liquidity and market depth, benefiting all participants. Understanding premiums is crucial for investors navigating the nuances of ETF pricing dynamics and optimizing their trading strategies.

Related Terms

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.