CashboardGlossary · Tokenization
What is a stock token premium?
A stock token premium is how far a tokenized stock trades above or below the share it tracks, after adjusting for how many shares one token stands for.
How does a stock token premium work?
Take the token price, divide it by the share price times the number of shares one token represents, and subtract one. Positive is a premium, negative a discount. Traders often quote it in basis points, where 100 bps is 1%.
The share ratio is the part people skip. Robinhood's Stock Tokens start at exactly one share per token, and a multiplier moves up each time a dividend is reinvested and changes again on a split. Compare the raw token price with the raw share price a year in and reinvested dividends look like a premium that is not there. Other issuers treat dividends their own way, so check how before you compare.
The premium also mixes two clocks. The token trades on-chain around the clock and the share only prints in exchange sessions, so after the close the figure compares a live token with a stale price. Robinhood's market makers can mint and burn Stock Tokens from Monday 02:00 to Saturday 02:00 Central European time. Outside that window no tokens are created or redeemed, so arbitrage against the share has to wait.
Say a token stands for 1.002 shares after a year of dividends, the share last traded at $500 and the token at $502. Fair value is $501, so the premium is about +20 bps, half the +40 bps a raw comparison suggests.
Also called: tokenized stock premium, token premium.
Where does a stock token premium show up in Cashboard?
The Robinhood stock tokens widget prices its top eight rows against the Yahoo Finance share price times Robinhood's multiplier and prints the premium in basis points, with the arithmetic on hover. When the cash quote is outside the regular session or over 15 minutes old, the premium is dimmed and the column tagged. The Tokenized stocks widget shows a plain percentage premium for xStocks, with no multiplier.
Frequently asked questions
Why do stock tokens trade at a premium to the stock?
Mostly because they trade when the stock does not. After the close and at weekends the token keeps pricing news while the share sits at its last print. During the session, thin on-chain liquidity and the fact that only market makers can mint keep a smaller gap open. The same forces can just as easily push a token to a discount.
Does a stock token premium include dividends?
It should. Robinhood's Stock Tokens fold reinvested dividends into a multiplier, so the fair price is the share price times that multiplier. Leave it out and a year of dividends shows up as a premium that is not there.
Where can you read more about stock token premium?
Related terms
Last reviewed . Market data in Cashboard comes from the providers named on each widget and may be delayed. Nothing here is financial advice.