Arbitraging to profits

Investing

 Players active in arbitrage derive the maximum from market imperfections. A player involved in arbitrage profits by trading a given commodity, or other item, that sells for different prices in different markets.

 An arbitrageur typically indulges in simultaneous purchase of securities in one market where the price is low and sells it in another market, where the price is comparatively higher at that point of time.

 These are typically done when the same securities are being quoted at different prices in the two markets; with a view to make a profit and carried on with the intention to derive maximum advantage from difference in prices of securities prevailing in the two markets.

 The objective of arbitrage is to make risk-less profit by simultaneously entering into transactions in two or more markets. If a certain share is quoted at a lower rate on the Bombay Stock Exchange (BSE) and at a higher rate on the National Stock Exchange (NSE), an arbitrageur will profit by buying the share ib BSE and selling it at NSE. This type of arbitrage is called arbitrage over