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Why This Obscure ETN Is Surging

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Why This Obscure ETN Is Surging
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Did you know there's an exchange traded note providing investors exposure to carbon credits? Don't worry if the answer to that question is “no” because the iPath Global Carbon ETN (NYSE: GRN) has toiled in relative anonymity for much of its just over nine years on the market.

GRN tracks the Barclays Global Carbon Index Total Return. That index “is designed to measure the performance of the most liquid carbon-related credit plans," according to Barclays, parent company of iPath. "Each carbon-related credit plan included in the Index is represented by the most liquid instrument available in the marketplace. The Index expects to incorporate new carbon-related credit plans as they develop around the world. Owning the ETNs is not the same as owning interests in the contracts comprising the Index or a security directly linked to the performance of the Index."

GRN has just $1.2 million in assets under management, a paltry sum for any ETF or ETN, let alone one that's almost a decade old.

What's Going On With GRN

If GRN is known for one thing, aside from being small and being associated with carbon investing, it's for wild price swings in short-term time frames. For example, the ETN is up more than 34 percent over just the past month.

“GRN, which is the only ETP of its kind in terms of being linked to the 'Carbon Allowances' segment, is trading with a high $8 handle presently,” said Street One Financial Vice President Paul Weisbruch in a Tuesday note. “Volatility seems to be the name in this particular segment and fund, for if one goes back on a chart for GRN one will note that in spite of scant trading volume on an average daily basis (the fund averages only about 2,200 shares traded daily) the fund certainly can move several standard deviations in no time flat.”

Recently, activity has picked up in GRN.

“Trading at a new 52-week high just last Thursday before settling in to current levels, GRN trading volume has increased relative to its paltry daily averages, as we have seen a couple sessions where more than 10,000 shares exchanges hands daily,” said Weisbruch. “Of course with only $1.2 million invested in the fund currently though, it is far from maturity in spite of debuting back in 2008, and rarely sees any notable creation activity, just short-term retail type trading it seems.”

Words Of Caution

Another trait GRN has developed over the years is giving back its gains almost as rapidly as it accrues them. The ETN is now 9 percent below its 52-week high set last week, close to meeting the definition of a technical correction.

The ETN's recent surge has it up 12.6 percent year-to-date, meaning the GRN was sagging for more than seven months until its August pop.

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