Time Arbitrage

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.

BREAKING DOWN '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."

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RELATED FAQS
  1. What is arbitrage?

    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >>
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    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
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    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
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