Arbitrage is a trading technique used by professionals in financial markets whereby exactly offsetting positions are taken in a market simultaneously but at different prices. The difference in price represents an immediate risk-free profit that is independent of the subsequent movement in price of the instruments traded. Simply put, “Arbitrage” Trading is the trading of securities when the opportunity exists during the trading day to take advantage of differences in value between the markets the trades are made within. Arbitrage Trading takes place all day long on most days that the markets are active. Arbitrage traders will buy and sell the same or closely related securities at the same time. They take advantage of the price or value differences in two separate markets such as the NYSE and the CME futures. In perfect securities markets there would never be any arbitrage traders or trades. Since the securities markets are not perfect when news or other information moves a security or index they can and often do become unequal in price temporally. If the markets were perfect all identical securities would trade at the same value or price on each market they were traded on. One of the most popular Arbitrage trading opportunities is played with the S&P futures and the S&P 500 stocks. During most trading days these two will develop disparity in the pricing between the two of them. This happens when the price of the stocks which are mostly traded on the NYSE and NASDAQ markets either get ahead or behind the S&P Futures which are traded in the CME market. Lets say the stocks get ahead of the futures in price. Arbitrage traders will sell the stock and buy the futures. They end up with the same or or closely related investment but have just made money by taking the difference in the prices from the two separate markets. Here is another example of Arbitrage Trading. Let’s say there is a Company that releases good news in a press release. The stock starts to trade higher on the NASDAQ, and there are call options available for the stock on the AMEX which have not had any or little action or volume. If you jump on the options before they catch up with the climbing stocks price you can often make money by selling the stock and buying the options at the same time. Remember the price disparities that offer the opportunities will not last long, seconds is the norm.

ForEx Trading

Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the forex market is a 24-hour market.

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Sports Arbitrage

Sports Arbitrage situations, also referred to as “sure bets”, “scalps” and “risk free bets”, are created every day in sport’s-betting markets. These are terms attributed to a minor flaw in the betting system and YOU can quite easily take advantage of them! Earning from this flaw is perfectly legal and tax free in most countries. The difference in the odds determines the amount of risk free profit to be made by the Sport’s Arbitrage Trader.

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Spread Betting

In the stockmarket, when you want to deal in traditional shares, you go to a stockbroker and he will quote you two prices.

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Arbitrage Systems

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Arbitrage Software

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