ETF Premium Discount Revert
In plain terms
When an ETF trades at a premium or discount to its underlying basket, the gap closes within 1-3 days as arbitrageurs step in - we fade the deviation.
How it works
ETF close-price deviation from NAV is transient - authorized participants arbitrage it back in 1-3 days. Sharpest in mid-liquidity ETFs (sector/factor sleeves), weakest in SPY/QQQ. We approximate NAV via snapshot-weighted constituent close.
Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- ETF holdings
ETF holdings and N-PORT constituent-weight panel.
Expected edge
- Reported return
- 30-80 bps over 1-3d (modeled)
- Tested over
- T+1 to T+3d
Madhavan-Sobczyk 2016 prem/disc mean-revert; internal target 30-80 bps over 1-3d.
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
When ETFs collectively buy more shares of a stock (creation units), the flow pressure tends to drift the price up over weeks; redemption flows do the opposite.
When many ETFs increase exposure to the same stock, we treat that as flow pressure and go long.
Explore ETF Premium Discount Revert on alphactor.ai
See which tickers this family is currently firing on, with live signals and rankings.