Market Arbitrage: Understanding Risk-Free Profit Opportunities

Market arbitrage is the risk-free profit available from the price discrepancy of the same investment in different markets. If the discrepancy is larger than the transaction fees than there is a definite risk-free opportunity to profit. For example, XYZ stock is listed on two different exchanges and one is trading at a higher price. To perform market arbitrage you would simultaneously sell the higher priced XYZ stock and buy the lower priced XYZ stock. Once the two prices converge, you will have gained a risk-free profit.