Market Arbitrage

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DEFINITION of 'Market Arbitrage'

Purchasing and selling the same security at the same time in different markets to take advantage of a price difference between the two separate markets.

BREAKING DOWN 'Market Arbitrage'

An arbitrageur would short sell the higher priced stock and buy the lower priced one. The profit is the spread between the two assets.

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RELATED FAQS
  1. What is the difference between arbitrage and speculation?

    Arbitrage and speculation are very different strategies. Arbitrage involves the simultaneous buying and selling of an asset ... Read Answer >>
  2. What models should I use to make arbitrage trades?

    Learn about different types of arbitrage models and techniques, and discover why classic arbitrage opportunities are very ... Read Answer >>
  3. What types of stocks have a large difference between bid and ask prices?

    Find out which factors influence bid-ask spread width. Learn why some stocks have large spreads between bid and ask prices, ... Read Answer >>
  4. What is arbitrage pricing theory?

    Find out what arbitrage pricing theory is and how it can theoretically be used by investors to generate risk-free profit ... Read Answer >>
  5. Why do futures' prices converge upon spot prices during the delivery month?

    It's a fairly safe bet that as the delivery month of a futures contract approaches, the future's price will generally inch ... Read Answer >>
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    Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads ... Read Answer >>
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