Did you ever buy something and then turn around and sell it right away to a predetermined buyer for a higher price? If so, you were engaging in a simple form of arbitrage -- a no-risk financial transaction that creates a profit. You were an arbitrageur -- a person who engages in arbitrage -- or a trader, for short.
Peter Macdiarmad/Getty Images
Buying and then immediately reselling sports tickets on eBay and other auction sites can mean a quick profit for agile arbitrageurs.
People who buy and sell things on eBay or other Internet auction sites sometimes utilize an arbitrage strategy. In this case, a person buys a case of handheld video games from a local seller at a price she knows is much lower than the going price of handheld video games on the auction site. Then she turns around and resells the handheld video games on the auction site and makes a profit.
Simple arbitrage is quite common in sports betting. In this type of arbitrage, bettors seek out bookmakers (bookies) who give different odds on the same sporting event. For example, Bookmaker A might give even odds on a basketball game between the Bulls and the Celtics. Bookmaker B gives 2-1 odds that the Bulls win. To exploit the difference in the odds given by the bookies, a person could bet with both of them and make a profit regardless of which team wins the game.
Like a chameleon, this type of commerce takes on different appearances, from the street vendor to the corporate mogul. In a 1980s movie based on arbitrage, the main character's name may remind you of a lizard-like creature. Find out which flick this is and learn about the different types of arbitrage on the next page.
