how does arbitrage work 
arbitrage is trading that exploits the tiny differences in price between identical or similar assets in two or more markets the arbitrage trader buys the asset in one market and sells it in the other market at the same time to pocket the difference between the two prices there are more complicated variations in this scenario but all depend on identifying market inefficiencies arbitrageurs as arbitrage traders are called usually work on behalf of large financial institutions it usually involves trading a substantial amount of money and the split second opportunities it offers can be identified and acted upon only with highly sophisticated software 