Arbitrage Opportunity Definition

Dec 08, 2023

Reviewed by: etf.com Staff

Edited by: etf.com Staff

Learn more about Arbitrage Opportunity

An arbitrage opportunity in the context of ETFs occurs when the market price of an ETF is different from its net asset value (NAV). This can happen for a number of reasons, such as differences in market liquidity, pricing errors, and market inefficiencies. Arbitrageurs can take advantage of these opportunities by buying the ETF at a discount and selling it at a premium, or vice versa. This can be a profitable strategy, but it can also be risky. Arbitrage opportunities are often short-lived, and they can be difficult to identify and execute.

ETF Glossary

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.

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