Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

How to find Arbitrage Opportunity?

What is Arbitrage?

Arbitrage is a practise in the economy of making risk-free profit by the aid of market fluctuations. This is done by buying an asset in one market at a lesser price and selling it immediately in the other market at a higher price. This gives the investor a marginal income based on market discrepancies.

Arbitrage acts as a necessary evil. It may appear barely credible due to its method of profit, but it is vital to redeem the price flux occurring in the markets. It makes sure that the price does not deviate for a longer period of time that may cause ruckus in markets.

 Arbitrage opportunities.

Arbitrage opportunities lie in any market setup that has certain ineffectiveness. One can find such changes to make riskless profit in many markets. For example, stocks, foreign currency, bonds, etc.

With digitisation touching all aspects of the world, the markets have become exceedingly tech savvy. Manually taking advantage of discrepancies is almost impossible today as any deviation in price is detected and corrected within seconds, leaving a very small window for arbitrage.

Risk-free and Risky Arbitrage

Generally arbitrage is risk-free, but due to the advent of digitization the profit from risk-free arbitrage is becoming low.

  • Risk-free Arbitrage- Here the temporary disparities are honed in to gain profit. Like stock and other assets. Many firms now have established state of art software to automatically take advantage of such fluctuations. But, a disadvantage of this risk-free venture is that one has to usually invest huge principle amount to get big gains.
  • Risky Arbitrage – People who are well versed with markets can take calculated risks when it comes to arbitrage. They can with informed calculations predict the fluctuations in the market that can gain them undeniable advantage. For example, when there is a potential merger or takeover of a company in sight, there might be some disturbance in the market. Experts can take advantage of this window period to gain profit.

Easy Arbitrage opportunities that you can make money from:

Foreign Currency – As one of the fields that provide maximum disparities, foreign currency has been one of the favourite playgrounds for money makers. Typically this works as a currency triangle. You trade currency A for B and B for C. The disparities between currency A and C will fetch you some risk-free arbitrage profits.

Liquidation – If you study markets regularly you will be able to gauge a financial stand of a company. A company that is approaching liquidation can provide sound ground for disparities due to the higher stock value of these companies during the process. Keeping an eye open for company finances can turn to good opportunities.

Merger and Acquisition – When a company merger of is taken over by another company, it generates some high tides. This results in market discrepancies. Taking advantage of this turbulence in the market can gain some sweet profit by arbitrage.

Classifies Arbitrage – One of the basic grounds for arbitrage is local classified markets. Buying goods from eBay or Craigslist and selling them for a profit is one of the basic forms of arbitrage. Although this method cannot fetch you major money, it can be a good source of income.

Although arbitrage is mostly risk-free, a sound knowledge of the financial markets and trends across different markets are crucial. Certain transition costs are also applied when you buy and sell from multiple markets. Researching the market economics before dealing with arbitrage is advisable.