Arbitrage trading involves exploiting price differences of the same asset in different markets for risk-free profits.
Key Points:
- Common in futures vs. spot market, options pricing, and cross-exchange arbitrage.
- Requires fast execution and large capital.
Example: A trader buys Nifty Futures at 21,800 on NSE and sells it at 21,820 on SGX (Singapore Exchange), making a 20-point arbitrage profit.