Arbitrage

This is a trading strategy that exploits the differences in price between identical assets (currencies, securities or commodities) in two or more markets. The arbitrage trader buys the asset in one market and sells it in the other market at the same time in order to pocket the difference between the two prices.For example, the stock of Company X is trading at $10 on the New York Stock Exchange (NYSE) while, at the same moment, it is trading for $12 on the London Stock Exchange (LSE). An arbitrage trader can buy the stock on the NYSE and immediately sell the same shares on the LSE, earning a profit of $2 per share.