What is Arbitrage Trading ?
“Arbitrage” trading is simply 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.
Arbritrage is legally allowed. In fact arbitrage is responsible for a large part of the daily volumes on the NSE & BSE exchanges.
What mainly takes place in India is called Market Arbitrage
Market Arbitrage involves purchasing and selling the same security at the same time in different markets (BSE & NSE) to take advantage of a price difference between the two separate markets. A market arbitrageur would short sell the higher priced stock and buy the lower priced one. The profit is the spread between the two assets.
Here is a simple example:
Suppose you own 600 shares of RPL. One trading day you notice that RPL is trading at 150 on the BSE and 145 on the NSE. You sell your 600 shares on the BSE at 150 and simultaneously buy back the 600 shares on the NSE at 145.
You profit in this case is 600*5.00 = 3000.00 less brokerages if any.
Search Our Archives
- Stocks Trading above their 50 day moving average - DMA In Stock Research
- Download free Ebooks based on Technical Analysis In Personal Training
- TOP 100 Stocks with the Highest P/E as on July 14th, 2013 In Stock Research
- TOP 100 Stocks with the Lowest P/E as on July 14th, 2013 In Stock Research
- Charting Pathsala - Your guide to Techincals In Technical Analysis
- Rajasekar Hi CB, sir, still i m holding 8800ce@1...In Intraday calls for 30-01-15
- rkrsna76 Dear Sir, Should we continue to ho...In Intraday calls for 30-01-15
- Ganeshh good morning CB sir........In Swing call - Buy Exide Industries - Book profit at 201
- Rajkumar Hi CB, I shorted @ 380.20 Zeel... W...In Intraday calls for 30-01-15
- GOWTHAM intraday target for hexaware please...In Intraday calls for 30-01-15
- Trader Hi CB, bought DLF @167 level, at what ...In Intraday calls for 30-01-15
- naveen hi cb. wat is the target of jsw hol...In Intraday calls for 30-01-15
- Praveen CB sir, Yur views on Bharti airtel, ss...In Intraday calls for 30-01-15
- Jess what is the target for bata today sir?...In Intraday calls for 30-01-15
- dipen Any thoughts on Bank Of Baroda? What w...In Intraday calls for 30-01-15
- CB ill be back in 1 hour...In Intraday calls for 30-01-15
- Raja Thanks Sir :)...In Intraday calls for 30-01-15
- CB Hi Jess, rk global is a good one Hi...In Intraday calls for 30-01-15