Will SPIcE units always trade at the Net Asset Value (NAV)?
At any point of time, SPIcE units may be traded at a premium or discount to the underlying net asset value. This difference in price may be due to the forces of demand and supply for SPIcE in the market at that point of time. In such situations, arbitrageurs would take advantage of the price differential and bring equality in price. For e.g. if SPIcE units are trading at a discount to their NAV, an authorized participant can capitalize on the difference by buying large numbers of SPIcE units at a discount (and redeeming them for the actual shares at NAV) and simultaneously selling the SENSEX stocks short to realize a profit. A reverse process will bring price parity if SPIcE units trade at a premium to their NAV. This is what generally keeps the NAV and traded prices close to each other. Traders/Authorized Participants/Arbitrageurs will step in to profit from such price discrepancies.
