What is Arbitrage Trading ?

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What is Arbitrage Trading ?

This article was posted on Jun 29, 2008

“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.

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82 Responses

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vikas Says:
September 30th, 2009
Posted at: 8:39 am
I HAVE NOT COMPLITED EXAM OF CASH AND DERIVATIVE PAPER BUT I NEED TO COMPLET IT AND I LIKE TO TRADING IT" GAME OF MIND AND SHOW TO YOUR SPRIT PAWER.
amit verma Says:
October 3rd, 2009
Posted at: 10:05 am
is there any software to learn arbitrage offline....
CB Says:
October 3rd, 2009
Posted at: 12:04 pm
Hi amit verma, no..not sure of any such software
dev Says:
October 3rd, 2009
Posted at: 6:18 pm
Can u please tell me which broker allows arbitrage trading in india .i.e buying in one exchange(NSE) and selling in another exchange (BSE).
vasu Says:
October 21st, 2009
Posted at: 1:20 pm
Can u please tell me whether Arbitrage is allowed in SBI online trading terminal?
megadeth Says:
October 28th, 2009
Posted at: 12:48 pm
idiots.....
u cant buy secs on 1 exchange & sell on another
Arbitrage is between 2 markets not 2 exchanges
Parthapratimdey Says:
November 10th, 2009
Posted at: 6:02 pm
Can any body tell which brockers allowed arbitrage Trading in india
SUNIL Says:
November 14th, 2009
Posted at: 3:58 pm
I HAVE NOT COMPLITED EXAM OF CASH AND DERIVATIVE PAPER BUT I AM TRANIED IN TRADING LINE ” BUT I WANT MAKE ARBITRAGE , I HAVE NO REFRANCE TELL ME WHAT I DO
dinesh Says:
November 21st, 2009
Posted at: 2:33 pm
i want to know about the arbitrage opportunity between nse.,bse how much it can be in % terms !
dinesh Says:
November 21st, 2009
Posted at: 2:35 pm
Can u please tell me which broker allows arbitrage trading in east delhi .i.e buying in one exchange(NSE) and selling in another exchange (BSE).
Pankaj Says:
November 26th, 2009
Posted at: 10:40 am
I know arbitrage very well. I have done arbitrage on system trading also and i know Manual also. I have 1 year exp in arbitrage . I want a job in this field. I live in New Delhi.
Plz guide me
sameer Says:
December 6th, 2009
Posted at: 12:07 am
i need job arbitrage
anough kule Says:
December 18th, 2009
Posted at: 6:14 pm
I am MBA student in mumbai
I want do course related with arbitage
Please suggest me
pradip Says:
December 20th, 2009
Posted at: 11:31 am
Can any body tell which brockers allowed arbitrage Trading in india
amit Says:
December 27th, 2009
Posted at: 9:52 pm
HI PANKAJ I CAN PROVIDE JOB IN arbitrage trading. CONTACT ME AT [email protected]... asap/
anough kule Says:
January 14th, 2010
Posted at: 10:25 am
i need job arbitrage
i am from mumbai
i had done my mba in finance