Arbitrage is the attempt to profit from price differences for the same thing in two places at the same time. A classic example is buying a share cheaper on one venue and selling it higher on another before the gap closes. True arbitrage aims to be low risk because both sides of the trade are executed together, though costs and delays can wipe out the edge.
Key takeaways
- Arbitrage thrives on speed, low fees, and reliable settlement.
- Price gaps usually vanish quickly once many traders notice them.
- What looks like free money often fails once commissions, taxes, and transfer delays are included.
- Regulators watch some forms of cross-market trading for market abuse.