Arbitrage occurs when a security is purchased in one market and simultaneously sold in another market, for a higher price. The temporary price difference of the same asset between the two markets lets traders lock in profits.

Is arbitrage trading still possible?

Despite the disadvantages of pure arbitrage, risk arbitrage is still accessible to most retail traders. Although this type of arbitrage requires taking on some risk, it is generally considered "playing the odds." Here we will examine some of the most common forms of arbitrage available to retail traders.

How does arbitrage trading work?

Arbitrage trading is when an investor simultaneously buys and sells assets in two different markets where the asset has different values, then pockets the difference. ... Only instead of buying and selling cookies, arbitrageurs can trade stocks and bonds.