Arbitrage is a way to make risk-free profits by taking advantage of a market’s price differences. In the right environment, it’s easy to see how you can make risk-free profits using arbitrage. Salman Khan of the Khan Academy shows two examples of using arbitrage in futures contracts, and he identifies important information you should know if you try this type of transaction.
From the first video, you’ll understand:
- How to combine trades to take advantage of arbitrage opportunities
- The information you'll need to understand if arbitrage is possible
From the second video, you'll understand:
- How arbitrage opportunities change when market conditions change
- How the market can set lower bounds on futures contract prices