Arb

Fancy Way to Say: Arbitrageur An arb is one who profits from price differentials of the same or similar securities in different markets. This profit is considered practically risk free. The more simultaneous these transactions can be made to each other the less risk involved. There are many types of arbitrage. For example, in after hours trading WXYZ may be bid on one ECN at 100 while it is offered on another at 99. An arb, if quick to recognize the opportunity and capitalize can buy from the seller offering 99 and simultaneously sell to the buyer bidding 100. She would recognize a quick one dollar profit which was practically risk free. The only risk involved would be one of the opportunity disappearing after only one transaction was finished.

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