WHAT IS ARBITRATION?
What is arbitration?
Arbitration is actually a purchase of a good at a lower price for resale on another market where its price is higher, in order to achieve profit. Such a transaction is carried out without risk.
Arbitration in practice
Suppose that the shares of a technology company are valued at USD 200 on the New York stock exchange and the WSE values them at USD 202. An investor can buy in the USA and then sell it in Poland – at the time, he will gain USD 2 on each sold share.
Earn money on exchange differences
Look at the graph next to this text – it shows the price differences for the same commodity in two different markets. As you can see, these prices are different, a commodity can sold for a higher price on one market and then on another. The beauty of arbitration is that it is not important whether the price is falling or rising, as it is the price movement that gives you the opportunity to make a profit.
- Price on a market A
- Price on a market B