: A trader (often a computer) finds a price difference for the same asset on two different exchanges.
: They buy on the cheaper exchange and simultaneously sell on the more expensive one. arbitrage
: Buying a convertible security (like a bond) and shorting the underlying stock to profit from mispriced options. : A trader (often a computer) finds a
Arbitrage is the practice of simultaneously buying and selling an asset in different markets to profit from a price discrepancy. It is a "risk-free" strategy in theory because the profit is locked in at the moment of the trade, though in practice, it requires extreme speed and sophisticated technology. How Arbitrage Works Arbitrage is the practice of simultaneously buying and
While often described as "free money," several factors can erase profits:
: Buying physical goods (e.g., collectibles, thrift store finds) in one location to sell immediately for a higher price on another platform. Key Risks & Challenges