What is arbitrage in trading?
Arbitrage in trading is the practice of simultaneously buying and selling an asset to take advantage of a difference in price. The asset will usually be sold in a different market, different form or with a different financial product, depending on how the discrepancy in the price occurs.
Opportunities for arbitrage can occur across almost any financial instrument, including options, shares, forex, commodities or derivatives.
With shares, for example, arbitrage can occur when a stock is listed on exchanges in two different countries. Because of discrepancies between the foreign exchange rates in each country, the price of the share can differ between the two exchanges. So, by simultaneously selling the stock on one exchange and buying it on the other, a trader can take advantage of the price discrepancy for immediate profit.