While often described as "free money," several factors can erase profits:
: Buying a convertible security (like a bond) and shorting the underlying stock to profit from mispriced options. arbitrage
Arbitrage is the practice of simultaneously buying and selling an asset in different markets to profit from a price discrepancy. It is a "risk-free" strategy in theory because the profit is locked in at the moment of the trade, though in practice, it requires extreme speed and sophisticated technology. How Arbitrage Works While often described as "free money," several factors
: A trader (often a computer) finds a price difference for the same asset on two different exchanges. While often described as "free money