Quote:
Originally Posted by BYU71
Stock X is being bought out at $40 a share. However it is currently trading at $39.50. An abitrager will step in and buy the stock at $39.50. He will have to factor in how long before the deal closes and the interest he could have made on the $39.50 vs the .50 gain.
It can get a lot more complicated when you have supposed imbalances in currencies, interest rates, futures , etc.
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Because trades are not simultaneous and you're banking on a small difference in different markets, you have to buy a lot to make enough?
And if any party fails to perform and you have borrowed money, you're screwed?