Articles on Stock markets
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What is market arbitrage?
Market arbitrage is when investors, particularly institutional investors, find price discrepancies between one exchange and another and exploit the difference for their profit. It has the helpful side-effect of bringing the prices on all exchanges closer together.
Arbitrageurs are investors and brokers who bridge the gap between prices in one market and another. The price difference is similar to the bid/ask spread profit created by market makers. If a stock is listed on multiple exchanges, it is said to be cross-listed, and it may present an arbitrage opportunity.
Some studies have found that it has and can be done, but trades have to execute instantaneously and the two markets must be relatively slow and illiquid. Bonds are a traditionally large arena for arbitrage especially as a way to make a risk-less profit by offsetting one guaranteed instrument with another, or by separating the interest/coupon from a bond and selling it.
There is also arbitrage in Forex, derivative markets, and stock markets. Arbitrage opportunities are harder and harder to come by the more efficient markets get due to computing power and the dissemination of information. Only the largest and best-informed institutional investors are ever likely to see an arbitrage opportunity.
What is a covered call?
A covered call is when the writer or seller of a call option either owns the underlying security, or has a guarantee
How do I get exposure to other currencies?
There are two main ways to get exposure to other currencies: you can buy them in the open market (FOREX) or in ETFs
What is a Money Purchase/Profit Sharing Plan?
Money Purchase plans and Profit Sharing plans are two types of Defined Contribution plans that can be used at a business
What is Home Equity?
Home equity is a notional amount that a person owns at any given time, which is computed as the market value of a...
What is Income Inequality?
Income inequality is the difference in the average income of the lower/middle class and the upper class
What is an Accounting Interpretation?
Accounting interpretations are not official standards, but they give insight for situations which may be new developments
What is a foreign institutional investor?
Foreign Institutional Investors are those whose company is based in another country. Investments made on behalf of...
What is market efficiency?
Market efficiency describes the degree to which relevant information is integrated into the price of a security
What does it mean to 'exercise an option?'
An options contract starts when the option is exercised, meaning that the option or buy or sell the security is utilized
What is a short position in options trading?
Taking a short position is selling a security that you don’t own, because you anticipate that its value is set to fall