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A strategy where a trader takes multiple positions to minimize risk of his trade.
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Arbitrage is a scenario in investments where a trader executes multiple trades to eliminate or minimize risk and secure a profit. It is used when a particular asset is available at a different price in different markets. In options, arbitrage opportunities are available when the options are underpriced to underlying. Such opportunities are very limited and arise only in specific situations. It requires considerable experience and expertise to spot and exploit it.
To execute an arbitrage strategy, you need to buy an underpriced position and simultaneously sell the overpriced position.
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