What is ownership arbitration?

Active Arbithare is the purchase and sales shares of the same or similar stock to achieve net profit from the transaction. In its purest form, its own arbitration does not include any risk, because the purchase and sales are carried out at the same time, which ensures immediate profit. Variations of traditional arbitration with their own capital, sometimes called risky arbitration, often carry at least a small amount of risk because they deal with situations where profit is not guaranteed.

Traditional property arbitration includes the purchase and sale of shares of the same shares that are different in two different markets. Let's say, for example, that the company has shares that sell for $ 10 (USD) on the New York Stock Exchange. Shares of the same company are $ 11 on the London Stock Exchange. In order to use its own capital in this situation, the investor could buy shares of the company on the New York Stock Exchange while selling them on the London stock exchange to produce $ 1 per shjs. Because the purchase and sale is done at the same time, there is no risk ofNo risk of losing money.

One variation on the traditional own arbitration, commonly called mergling arbitration, includes the purchase and sale of shares of two companies that are going to merge. An example would be if the company A has a share of $ 50 shares and is preparing to purchase Company B, which has a price of shares of $ 24. As part of the Agreement, the Company Agays that the Company's shareholders will provide one share of the Company A for each two shares in B. Investor, who owns the Company's shares, he could apply the stock arbitration to this situation by selling Company B shares in their place. The risk in this type of situation is that the merger agreement could fall or change rapidly.

Another option, sometimes called trading with couples, includes the purchase and sale of the eventVery similar shares that were historically very closely, but suddenly a significant price variance develops. For example, say Electric Company X and Electric Company Y Stocks usually trade in several cents. If the X -Company's shares suddenly increased $ 1 per USD over Y's, an investor who owns X shares, could sell and invest money in Y shares and try to make a profit when Y's shareholds are historically. Like the arbitration of mergers, this type of own assets also usually carries a certain risk, because there is no warranty that the share of Y will increase the value to match X.