Control your personal finance   free website content | contact | privacylink partners
Home » Investing
Money articles

» Personal finance
» Credit cards
» Saving money
» Debt elimination
» Budgeting
» Investing
» Business
» Real estate
» Making money
» Miscellaneous
» Career
» Loans
» Promote your business
» Insurance
» Bankruptcy

» Archive

Arbitrage explained - A no-risk strategy, or just unethical

By Jakob Jelling
Cashbazar.com

Arbitrage is a term that carries a couple of different connotations, depending on the person who is using it. Therefore, you should have a basic understanding of both types of arbitrage, even though most purists will say that only the first definition is actually a true definition of the word.

According to the first definition, arbitrage is a type of portfolio or stock transaction that results in profit, but no risk. These transactions are hard to come by, and even when you do find one that could result in a profit, you should still be careful, because it is possible that the profit will evaporate due to fees associated with the transactions.

A common example of this is when there is a company that is trading stock on two different markets. If the price of stock on those different markets is different – even if it is only by a few pennies per share, then you can buy and sell the stock almost simultaneously to make the difference. Usually this is done if the person buying the stock has enough money to buy and then sell a lot of stock – you will need to purchase a lot of it in order to make any money.

Arbitrage in this manner is not always possible since there are occasionally fees that need to be considered. If the transaction is going to take place somewhere where there are fees assessed for each transaction, then it will be harder to make any money through arbitrage. It is important to make sure that your profit will be higher than the transaction fees.

The other type of arbitrage usually involves hedge funds, and can sometimes result in scams. Therefore, you should make sure that you pay attention to the type of transactions you’re going to be taking part in.

Unless you already have a lot of experience with the markets, then you will probably not be engaging in arbitrage on your own. However, you should have a good idea of what it is just in case you are thinking of buying into a mutual fund, or using a broker who engages in arbitrage, you should make sure that it will not be a type of arbitrage that is unethical.

About the author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.

Search CashBazar

Google
 
Web www.cashbazar.com


Latest money articles

» Controlling the price changes in futures markets
The lock-limit is one way that the markets can be controlled.

» How much will price changes effect stock trading?
Price elasticity is an economics term that refers to the way that price changes of stock can affect the demand for that stock.

» Large volume trading in steps
Program trading is a term that is also used in at least two different (though similar) meanings.

» How many stock options are available?
Open interests are not a feature of all stock market trades. In fact, open interests are calculated based on options and futures trades.

» Protect your portfolio from large losses
If you are worried about the stock market, then you might want to consider portfolio insurances.

» Insure your investment without limiting returns
Are you looking for a way to trade on the stock market without having to deal with all of the risks?

» Regional funds explained
Increase your portfolio diversity with funds from other regions.

» What is a derivative?
Invest in commodities without buying the commodities themselves.

» What is an option?
An option is an agreement that a commodity or stock will be available for purchase at a set date.

» Should I always pay a commission when buying mutual funds
There are three main types of mutual funds when it comes to commissions.

» Find the lowest risk investment portfolio
If you're trying to find a good investment portfolio, then you may want to look at the Treynor measure.

» The difference between PAX World Funds and The World Funds
The first type is purchased through the company PAX, and these funds focus on socially responsible companies.

» The Alpha factor explained
A new method of differentiating between different investments.

» How good is your planned investment
A company prospectus is a legal document that has been filed by the company that you might be thinking about investing in.

» How do I find the best investment advisor?
If you're looking for the best investment advisor for you, you should make sure that you pay attention to the type of investments that that advisor usually recommends.

» How to find the best full-service stockbroker - ask questions
Before you decide who you should choose for your full-service stockbroker, make sure that this is the best option for you financially.

» Investing in commodities
Investing in commodities is not too hard to do - the real problem comes in when you are trying to decide which commodities you should invest in, and when it is better to buy or sell a particular product.

» Don't wait to get your retirement payments!
If you're looking for an annuity, there are a variety of different annuities to choose from.

» Multisector bond funds explained
If you are looking to invest in bonds, but you are not sure that you want to deal with making all of the purchases on your own, bond funds might be the right option for you.

» Private annuity explained
The biggest difference between a regular annuity and a private annuity is that private annuities take place between two individuals, instead of between an individual and an insurance company.

» Avoid estate taxes with a life insurance trust
If you're looking for another way to insure yourself with a life insurance policy that will avoid any taxes after your death, then you should look into getting a life insurance trust.

» What is a Section 1035 policy exchange?
Don't lose insurance money when you change policies.

» Who should consider annually renewable term life insurances?
If you're looking for a good insurance policy, then you should probably take a good look at your financial situation, and at what you can count on being your situation in the future.

» Death benefit only plan explained
If you need life insurance, but you are not able to afford the regular price for life insurance, then you might want to look into a death benefit only plan.

» How to save money on your homeowner's insurance
In the case of homeowner's insurance, the most common way to reduce the amount of money that you will be paying each month is to increase your deductible.


Make money online

Please visit Sitetube.com and learn how to profit from your website.