Arbitrage...thats the name of riskless trading..however, before one can take up arbitrage to increase his income there are certain ground rules which need to be strictly followed and those are speed, accuracy and calculation...wondering what these need to do with riskless trading...no need to have all the gyan about equities, company ratios, profitability, major events or anything..the next question which will come up in your mind...is that speculation..my answer would be no..it way different from it
Arbitrage means buying shares in BSE and selling them in NSE & vice-versa and later on squaring them off before the trading day closes. Lets take an example..suppose Ajay buys 100 shares of RIL @Rs.2,600 from BSE at the same time the price of RIL is Rs.2,645 in NSE, so he sells his stock at the same moment..making a cool difference of Rs.45 per share, i.e. Rs.4,500
Step-2: Now he needs to square-up this transaction, i.e., he needs to sell 100 shares of RIL in BSE and buy 100 shares in NSE
Step-3: Assume if the market goes up..by 85 points and there is same trend in the RIL scrip..the price of RIL at one given moment in BSE is Rs.2,635 and in NSE is Rs.2,655...at that very moment Ajay makes the transaction...giving a negative of Rs.20 per share, i.e.Rs.2,000
Thereby, at the end of the day Ajay makes a cool profit of Rs.2,500
Wondering what if market goes red....coming up
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