Arbitrage is an investment strategy that involves buying a commodity in one market and selling it in another so quickly that it is sometimes said to be simultaneous. The idea is to buy the commodity in a market where it is valued lower and sell it in a market where it is valued higher. For example, if silver is trading for $100 per ounce in London and $105 per ounce in New York, buying silver in London and immediately reselling it in New York will yield a profit of $5 per ounce (not counting the cost of the transactions).
Arbitrage often involves trading from one foreign market to another in order to take advantage of fluctuating exchange rates. That’s one reason the re-sale must be immediate in order to ensure a profit. Arbitrage is often called “riskless profit” because it is virtually risk-free when a price difference in two markets is observed and when the purchase and sale are made virtually simultaneously