What happens to an ETF if one of the companies in the ETF gets aquired?
There are a number of ways this can result. In a broad ETF, such as SPY, the S&P 500 spider, the S&P index will have 500 stocks no matter what, so a buyout would simply result in a re-shuffling of the index makeup. No buyout will happen so quickly that there's no time to choose the next stock to join the index. In your case, if the fund manager (per the terms of the prospectus) wishes to simply reallocate the index to remove the taken-over stock that's probably how he handle it.  Unless of course, the prospectus dictates otherwise. In which case, a cash dividend is a possible alternative.
"Why bother with the ETF? Just trade the options -- at least you have the ability to know what you actually are doing. The ""exotic"" ETFs the let you ""double long"" or short indexes aren't options contracts -- they are just collections of unregulated swaps with no transparency. Most of the short/double long ETFs also only attempt to track the security over the course of one day -- you are supposed to trade them daily. Also, you have no guarantee that the ETFs will perform as desired -- even during the course of a single day. IMO, the simplicity of the ETF approach is deceiving." You do not hold leveraged ETF for longer than a few days.  You have UGAZ and DGAZ, both 3x leveraged, one longs one shorts.  What happens if you buy both? You don't get 0% return. In fact, you get -10% return if you hold both for 3 months.   No matter what happens, they both go down in long term.  Call it Leverage Decay, Beta Slippage, Contango, Rollover, etc.  If you want to gamble that NG goes up within 3 days, go ahead. Just be prepared for the worst cases like losing 15% in 3 days.  If you want to speculate the NG will recover in a year, buy Natural Gas industry ETF http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=FCG "Overall, since gold has value in any currency (and is sort of the ultimate reserve currency), why would anyone want to currency hedge it? Because gold is (mostly) priced in USD. You currency hedge it to avoid currency risk and be exposed to only the price risk of Gold in USD.  Hedging it doesn't mean ""less speculative"". It just means you won't take currency risk. EDIT: Responding to OP's questions in comment what happens if the USD drops in value versus other major currencies? Do you think that the gold price in USD would not be affected by this drop in dollar value? Use the ETF $GLD as a proxy of gold price in USD, the correlation between weekly returns of $GLD and US dollar index (measured by major world currencies) since the ETF's inception is around -47%. What this says is that gold may or may not be affected by USD movement. It's certainly not a one-way movement. There are times where both USD and gold rise and fall simultaneously. Isn't a drop in dollar value fundamentally currency risk? Per Investopedia, currency risk arises from the change in price of one currency in relation to another. In this context, it's referring to the EUR/USD movement. The bottom line is that, if gold price in dollar goes up 2%, this ETF gives the European investor a way to bring home that 2% (or as close to that as possible)." If a stock that makes up a big part of the Dow Jones Industrial   Average decided to issue a huge number of additional shares, that will   make the index go up. At least this is what should happen, since an   index is basically a sum of the market cap of the contributing   companies. No, indices can have various weightings. The DJIA is a price-weighted index not market-cap weighted. An alternative weighting besides market-cap and price is equal weighting. From Dow Jones: Dow Jones Industrial Average™. Introduced in May 1896, the index, also   referred to as The Dow®, is a price-weighted measure of 30 U.S.   blue-chip companies. Thus, I can wonder what in the new shares makes the index go up? If a stock is split, the Dow divisor is adjusted as one could easily see how the current Dow value isn't equal to the sum or the share prices of the members of the index. In other cases, there may be a dilution of earnings but that doesn't necessarily affect the stock price directly as there may be options exercised or secondary offerings made. SO if the index, goes up, will the ETF DIA also go up automatically   although no additional buying has happened in the ETF itself? If the index rises and the ETF doesn't proportionally, then there is an arbitrage opportunity for someone to buy the DIA shares that can be redeemed for the underlying stocks that are worth more in this case. Look at the Creation and Redemption Unit process that exists for ETFs. If the company went bankrupt, the issued public shares that were outstanding at the time most likely were voided, in which case your shares are most definitely gone.  The company might have done a new stock issuance coming out of bankruptcy with a different symbol, and while it could be substantially the same company, it doesn't mean much for you.  It's unfortunate this may be the case, but it is one of the risks of investing. "For the first and last questions, I can do this multiple ways.  For the middle question, I'll just make up values.  If you want different ones, you will have to redo the math.   I am going to assume that you participate in the merger exchange, swapping your share for their offer.   If you own one share, it depends how they handle fractional shares.  Your original one share of ABC can be worth either one share of XYZ or 1.05 shares of XYZ.  If you get one share, you typically get an additional $.80 cash to make up for the fractional share.   You might ask why you don't just get $20 cash and one share of XYZ.  Consider the case where you own twenty shares of ABC.  Then you'd own twenty-one shares of XYZ and $384.  No need for fractional shares.   Beyond all this though, the share value of XYZ is not set autocratically.  The shares might be worth $16, $40, or $2 after the merger.  If both stocks are perfectly valued and the market is aware of that value, then it will depend partially on the number of shares of each.   For example, if we assume there are 10,000 shares of ABC and 50,000 shares of XYZ (including the shares paid for ABC), then their initial market values are $320,000 for ABC and $800,000 for XYZ.  XYZ is paying $360,000, so its value drops to $440,000.  But it is gaining ABC, which is worth $320,000.  Net value now is $760,000 or $15.20 per share.   This has assumed that the shares transferred from XYZ to the shareholders of ABC were already included in the market value.  This may mean that the stock price was previously $20 or so with almost 40,000 shares in circulation.  Then they issued new shares, diluting the value down to $16.  We could start at 50,000 shares at $16 and end up with 60,000 to 60,050 shares at $13.332 to $13.333 per share.  Then XYZ is really only paying $326,658.31 for ABC.  That's a premium of only $6,658.31 for ABC and gives a final stock value of $13.222 per share.   The problem though is that in reality, there is no equivalent of perfect value.  So I say again that the market value might be $15.20 (the theoretic answer that best fits the question given the example quantities of shares), $13, $20, or something else.  It will depend on how the market perceives the deal.  Is the combined company worth more or less than the sum of its parts?   And beyond this, you will have $19.20 to $20 in cash in addition to your XYZ share (or 1.05 shares).  Assuming 1.05 shares, that would be $15.96 plus the $19.20--that's $35.16 total in theory or anything from $19.20 up in practice.  With the givens, the only thing of which you can be sure is the $19.20 cash.  The value of the stock is up in the air.   If XYZ is only privately traded, this is still true.  The stock is worth the price that someone will pay for it.  The ""someone"" is just more limited with privately traded stocks." 2 things may happen. Either your positions are closed by the broker and the loss or profit is credited to your account. Else it is carried over to the next day and you pay interest on the stocks lent to you. What happens will be decided by the agreement signed between you and your broker. The Brokerage firm will purchase shares for the dividend paid in a omnibus account for the security of the issuer and then they will distribute fractional shares among all their clients that chose Div Reinvest.  They will only have to buy 1 extra share to account for the fractional portion of what they allocate.  The structure of the market does not permit trading of fractional shares. There is generally not any impact to the market place for Div Reinvest with the exception of certain securities that pay large dividends that are not liquid. sometimes this occurs in  preferred securities where a large amount of Div reinvestment could create a large market order that has market impact.  Most brokers place market orders for the opening on the day following the payment of the dividend. When you sell the fractional portion same process as full shares are sold into the market and the fractional if traded between you and the brokers omnibus account.  if it creates a full share for the broker (omnibus has .6 shares and you sell him .5 they would likely flip that out to the street with the full share portion of your order. This would not have impact to outstanding shares and all cost are operational and with the broker handling the Div reinvestment service.