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
- Trader Thanks cb bro...will follow your advic...In Intraday calls for 24-11-15
- mrp Hi Hiten, keep some catchy prfl pic......In Intraday calls for 24-11-15
- CB Hi Hiten, thanks Hi Vignesh, Wish y...In Intraday calls for 24-11-15
- Hiten Stock idea. Coral India finance &a...In Intraday calls for 24-11-15
- Hiten Go long in Nifty at every dip, TGT 850...In Intraday calls for 24-11-15
- Vignesh Hi CB, Happy Gurunanak Jayanti....In Intraday calls for 24-11-15
- lokesh Dear sir, kindly advice on hov serv...In Intraday calls for 24-11-15
- gaps Hi CB, how do you see lic hsg and ioc ...In Intraday calls for 24-11-15
- Suriya Hi cb Wt is your view about BPCL?...In Intraday calls for 24-11-15
- Tushar Holding nifty 7800pe 375qty @20.50.......In Intraday calls for 24-11-15
- Trader Hello cb bro,did u check anjani Portla...In Intraday calls for 24-11-15
- Nb Good afternoon sir ,whats the advisabl...In Intraday calls for 24-11-15
- TAPAN CB SIR, I HAVE HOLDING UNITECH LAST 1Y...In Intraday calls for 23-11-15