Arbitrage -

: Betting on the success (or failure) of a corporate merger by buying the target company's stock and shorting the acquirer's stock.

Arbitrage is the practice of simultaneously buying and selling an asset in different markets to profit from a price discrepancy. It is a "risk-free" strategy in theory because the profit is locked in at the moment of the trade, though in practice, it requires extreme speed and sophisticated technology. How Arbitrage Works

: They buy on the cheaper exchange and simultaneously sell on the more expensive one. arbitrage

: Buying a convertible security (like a bond) and shorting the underlying stock to profit from mispriced options.

: A trader (often a computer) finds a price difference for the same asset on two different exchanges. : Betting on the success (or failure) of

While often described as "free money," several factors can erase profits:

: This activity actually helps the market by narrowing price gaps, eventually driving prices toward efficiency. Common Strategies How Arbitrage Works : They buy on the

Arbitrageurs exploit market inefficiencies—temporary glitches where supply and demand levels differ across exchanges.