THE WORLD OF ARBITRAGE
THE WORLD OF ARBITRAGE Day traders work fast, looking to make lots of little profits during a single day. Arbitrage is a trading strategy that looks to make profits from small discrepancies in securities prices. The word arbitrage itself comes from the French word for judgment; a person who does arbitrage is an arbitrageur, or arb for short. The idea is that the arbitrageur arbitrates among the prices in the market to reach one final level. In theory, arbitrage is riskless. It’s illogical for the same asset to trade at dif ferent prices, so eventually the two prices must converge. The person who buys at the lower price and sells at the higher one will make money with no risk. The challenge is that everyone is looking for these easy profits, so there may not be many of them out there. Good arbitrageurs have a paradoxical mix of patience, to wait for the right opportunity, and impatience, to place the trade the instant the opportunity appears. If you have the fo