What is Arbitrage? Find out here
March 12, 2016
Arbitrage represents the raison d’être of commodity trading. Traders try to generate profits by exploiting price differentials, be in geographical, product, or temporal form.
Geographical arbitrage represents a situation when one product can be sourced cheaper from a different location even when taking into account transportation costs.
Product arbitrage represents a situation where the trader optimizes or substitutes the product sold for a more economical (yet contract-and-purpose compliant) solution.
Time arbitrage represents a situation where a trader profits from a commodity that has different pricing at different delivery times (immediate vs deferred delivery), taking into account storage and financing costs.