Loading the player...

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.

RELATED TERMS
  1. Arbitrageur

    A type of investor who attempts to profit from price inefficiencies ...
  2. Law Of One Price

    The theory that the price of a given security, commodity or asset ...
  3. Futures Spread

    An arbitrage technique in which a trader buys one commodity and ...
  4. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  5. Currency Arbitrage

    A forex strategy in which a currency trader takes advantage of ...
  6. Horizontal Spread

    An options strategy involving the simultaneous purchase and sale ...
Related Articles
  1. Trading

    Why Is Arbitrage Trading Legal?

    Not only is arbitrage legal in the US and most developed countries, it can be beneficial to the overall health of a market.
  2. Investing

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  3. Trading

    Arbitrage

    Learn more about this trade that profits from price differences between financal instruments and markets.
  4. Trading

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  5. Trading

    Understanding Arbitrage Pricing Theory

    Investors use the arbitrage pricing theory to identify an asset that’s incorrectly priced.
  6. Trading

    Trading The Odds With Arbitrage

    Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage.
  7. Investing

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  8. Trading

    NYIF Instructor Series: Risk Arbitrage

    In this short instructional video Jack Farmer explains what risk arbitrage is outlines three different examples of it.
  9. Investing

    How ETF Arbitrage Works

    ETF arbitrage brings the market price of ETFs back in line with net asset values when divergence happens. But how does ETF arbitrage work?
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 skills should I acquire to take advantage of arbitrage trading?

    Understand what arbitrage trading involves and what the necessary skill set is that a trader must develop in order to master ... Read Answer >>
  3. What is the difference between arbitrage and hedging?

    Dive into two very important financial concepts: arbitrage and hedging. See how each of these strategies can play a role ... Read Answer >>
  4. How do I use the news to find arbitrage opportunities?

    Learn what risk arbitrage trading is and how this type of arbitrage trading opportunity is available to individual retail ... Read Answer >>
  5. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    Find out more about financial spread betting, arbitrage and the differences between financial spread betting and the arbitrage ... Read Answer >>
  6. How do I use software to make arbitrage trades?

    Understand the meaning of arbitrage trading, and learn how traders employ software programs to detect arbitrage trade opportunities. Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center