Time Arbitrage

AAA

DEFINITION of 'Time Arbitrage'

An opportunity created when a stock misses its mark and is sold based on a short-term outlook with little change in the long-term prospects of the company. This miss occurs when a company fails to meet earnings estimates by analysts or its guidance, resulting in a short-term stumble where the price of the stock decreases. Some investors use time arbitrage to increase their chances of outperforming the market.

INVESTOPEDIA EXPLAINS 'Time Arbitrage'

There are numerous examples of time arbitrage. Generally speaking, single misses do not mean a company is in trouble, and there is often a good chance of a rebound long term. However, if the misses become habitual, time arbitrage may actually be a losing proposition. Essentially, time arbitrage is another version of the old advice, "buy on bad news, sell on good."

RELATED TERMS
  1. Arbitrage Trading Program - ATP

    A computer program used to place simultaneous orders for stock ...
  2. Market Arbitrage

    Purchasing and selling the same security at the same time in ...
  3. Inward Arbitrage

    A form of arbitrage involving rearranging a bank's cash by borrowing ...
  4. Forex Arbitrage

    A trading strategy that is used by forex traders who attempt ...
  5. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  6. Contrarian

    An investment style that goes against prevailing market trends ...
Related Articles
  1. What Is Market Efficiency?
    Active Trading

    What Is Market Efficiency?

  2. Arbitrage Squeezes Profit From Market ...
    Options & Futures

    Arbitrage Squeezes Profit From Market ...

  3. Trading The Odds With Arbitrage
    Options & Futures

    Trading The Odds With Arbitrage

  4. An Introduction To Behavioral Finance
    Active Trading Fundamentals

    An Introduction To Behavioral Finance

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center