Arbitrage Opportunity Definition
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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