Arbitrage (stocks)

Arbitrage is the process of simultaneously buying and selling an asset in different markets to profit from price discrepancies. Since the same security can trade at different prices across exchanges, traders exploit these inefficiencies for quick, risk-free gains. For example, if a stock is trading at $100 on the NYSE but $100.50 on a foreign exchange, an arbitrage trader could buy at $100 and instantly sell at $100.50 for a profit. While arbitrage is common in stocks, forex, and options, high-frequency trading algorithms now dominate this space.