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."

  1. Contrarian

    An investment style that goes against prevailing market trends ...
  2. Inward Arbitrage

    A form of arbitrage involving rearranging a bank's cash by borrowing ...
  3. Arbitrage Trading Program - ATP

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

    Purchasing and selling the same security at the same time in ...
Related Articles
  1. Active Trading

    What Is Market Efficiency?

    The efficient market hypothesis (EMH) suggests that stock prices fully reflect all available information in the market. Is this possible?
  2. Options & Futures

    Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.
  3. Options & Futures

    Trading The Odds With Arbitrage

    Profiting from arbitrage is not only for market makers - retail traders can find opportunity in risk arbitrage.
  4. Active Trading Fundamentals

    An Introduction To Behavioral Finance

    Curious about how emotions and biases affect the market? Find some useful insight here.
  5. Options & Futures

    Hedge Funds Hunt For Upside, Regardless Of The Market

    Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
  6. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  7. Trading Strategies

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  8. Mutual Funds & ETFs

    Protect Mutual Funds From a Volatile Market

    Learn about the best ways to invest in mutual funds, including which types of funds are safest, while still protecting your investment from market volatility.
  9. Professionals

    5 Career-Killing Facebook Mistakes

    Facebook might be a great way to show off those cute pics from your vacation -- but your page isn’t so great if it hurts your career.
  10. Mutual Funds & ETFs

    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.
  1. Is there a difference between financial spread betting and arbitrage?

    Financial spread betting is a type of speculation that involves a highly leveraged derivative product, whereas arbitrage ... Read Full Answer >>
  2. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  3. How does arbitrage affect the price of exchange traded funds (ETFs)?

    Arbitrage may be used to bring the market value of an exchange-traded fund (ETF) back into line with the net asset value ... Read Full Answer >>
  4. How valuable is the forward rate as an overall economic indicator?

    Any given forward rate is theoretically equal to its corresponding spot rate plus future expectations. Many investors and ... Read Full Answer >>
  5. How does a merger affect the shareholders?

    A merger affects the shareholders of both companies in different ways and is influenced by several factors, including the ... Read Full Answer >>
  6. How do I find positive correlation in the stock market?

    Positive correlation refers to a statistical relationship in which two variables generally move in the same direction together. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center