Arbitrage Opportunity Definition

Learn the definition of asset allocation and other ETF terminology from the glossary.

Reviewed by: Staff
Edited by: 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.

Related Terms

Bid/Ask Spread, Derivatives-Based ETF, Net Asset Value (NAV), Premium, Futures

ETF Glossary is’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.