Arbitrage refers to the practice of buying an asset then selling it immediately 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 instrument, depending on where the discrepancy in price occurs. Opportunities for arbitrage can occur in almost any financial instrument, including options, shares, forex, commodities or derivatives.
In stocks, for example, arbitrage can occur when a stock is listed on exchanges in two different countries. Because of a foreign exchange shift in one of the countries, the price of the share differs between the two exchanges. 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.