what's the difference between ETF and ETN?

[mizhael]

thanks

 

[quicktrader12]

ETF : Exchange traded fund
ETN: Exchange traded note

An ETN will track their underlying index but is basically a senior debt note issued by the sponsoring company.

An ETF is like an index of the underlying securities.

The big difference is an etn has credit risk if the issuing company were to default.

 

[ElectricSavant]

Tax Reporting...

 

[mizhael]

Quote from quicktrader12:

ETF : Exchange traded fund
ETN: Exchange traded note

An ETN will track their underlying index but is basically a senior debt note issued by the sponsoring company.

An ETF is like an index of the underlying securities.

The big difference is an etn has credit risk if the issuing company were to default.

both allow redemption?

 

[WinstonTJ]

Quote from mizhael:

both allow redemption?

Notes expire while Funds allow for create/redeem - its just a different process.

 

[MTE]

Quote from quicktrader12:

...The big difference is an etn has credit risk if the issuing company were to default.

One of the most important, if not the most important, difference!

I had the "pleasure" of experiencing the credit risk first hand, when AIG got in trouble and some of the ETNs that were linked to them got hammered.

 

[losemind]

Quote from ElectricSavant:

Tax Reporting...

Could you please elaborate more?

Thx

 

[ElectricSavant]

You get a "K-1" or "K something" at the end of the year...well nearly before April 15th...lets say.

There are several lines off the form that you must report on your taxes vs. stocks...I do not remeber the details as Turbo Tax deals with it...

As far as the ramifications...ETF's were better for me at that time...

ES

Quote from losemind:

Could you please elaborate more?

Thx

 

[Options12]

Quote from MTE:

One of the most important, if not the most important, difference!

I had the "pleasure" of experiencing the credit risk first hand, when AIG got in trouble and some of the ETNs that were linked to them got hammered.

What happens to puts when an ETN issuer defaults as in Lehman '08? Can the owner of puts exercise, or otherwise cash out?

 

[WinstonTJ]

Quote from Options12:

What happens to puts when an ETN issuer defaults as in Lehman '08? Can the owner of puts exercise, or otherwise cash out?

I could be wrong but I'm pretty sure that didn't happen with the Lehman ETNs... You'd have to read the prospectus. A lot of the levered ETFs have clauses that protect counterparties against total loss in large moves. Doesn't say much for the investors - but the counterparties at least are in the clear.