68 votes

Can someone make money by cycling through currencies and exchanges?

I recently got this idea from ... You're not the first. (Or the 8000th.) Is there a word for it? Arbitrage (pronounced in French) is "the simultaneous purchase and sale of the same asset in ...
RonJohn's user avatar
  • 50.7k
56 votes

Can someone make money by cycling through currencies and exchanges?

An example should be something like this: $10 ⟶ ¥10000 ⟶ €5 ⟶ $12 (profit) This is called triangular arbitrage. The concept is simple and well-known. The process is not risk-free. There are many ...
Flux's user avatar
  • 17k
22 votes

Can someone make money by cycling through currencies and exchanges?

One of my teachers (established engineer doing his Ph.D. in older age teaching us) at the university made a solid amount of money designing special hardware, one of the uses of which was to trade on ...
mishan's user avatar
  • 320
10 votes

Who buys a weak currency?

Anyone who wants to buy something from Zimbabwe or pay taxes in Zimbabwe will need to buy Zimbabwean dollars. A company in Zimbabwe that pays its workers in Zimbabwean dollars but sells products in ...
xirt's user avatar
  • 5,121
9 votes
Accepted

How should I pay tax on arbitrage profits?

According to the general introduction to the HMRC manual on CGT: Chargeable gains accrue on the disposal of assets. There's a bunch of other material but none of it seems to put any qualification ...
GS - Apologise to Monica's user avatar
9 votes

Why are pair-wise exchange rates not the inverse of each other?

The difference is never super high, but it is higher than necessary. Why is that the case? Because there is no law that requires the true rates to be perfect reciprocals of each other. We would ...
David Schwartz's user avatar
9 votes

Can someone make money by cycling through currencies and exchanges?

There are two ways to do this: One is to find "instant" cycles of currency pairs which are not completely equivalent and result in a higher amount after conversion, as explained in the ...
jcaron's user avatar
  • 3,952
9 votes

Can someone make money by cycling through currencies and exchanges?

About the time when the Euro was introduced, one major store in the UK accepted Euro for payment (they don't do that anymore), and returned your change in pound. Unfortunately for them, they had ...
gnasher729's user avatar
  • 22.9k
7 votes
Accepted

Is credit card arbitrage still viable?

Here in the UK it's certainly possible. We call it stoozing. The basic steps are Get a credit card with a long 0% period for purchases and a savings account with as high a rate as possible. Do your ...
Peter Green's user avatar
  • 2,928
7 votes

Is credit card arbitrage still viable?

It's still possible, but current money market and other guaranteed rates are so low that it's usually not worth the time and energy. However, even if interest rates were higher and it possibly would ...
TTT's user avatar
  • 47.2k
7 votes

Who buys a weak currency?

Price is everything. There is a price high enough that the best asset will be desired by no one, and a price low enough that the worst asset will be desired by everyone. If the price is constrained (e....
nanoman's user avatar
  • 29.5k
5 votes

Who buys a weak currency?

Perhaps this may be helpful to think of in terms other than currency. It seems obvious that gold bullion is more valuable than rice. So, if you have some rice to sell, and get gold in return, it ...
Josiah's user avatar
  • 259
5 votes

Is this gamble arbitrage opportunity?

The author is correct, this is not an arbitrage opportunity. To understand why, you need to look at the expected value in each game. In the first game, in which you pay the $7 to play, let’s look at ...
Ben Miller's user avatar
  • 115k
4 votes

For someone who already has enough cash to buy a home, isn't it better to wait and take mortgage when interest rates are high?

No. The hole in the plan is that not only is there some small risk in bonds (Orange County 1994?), but also bond issuers can and do refinance just like mortgage holders can when interest rates drop. ...
Rupert Morrish's user avatar
4 votes
Accepted

Why can't we arbitrage ETFs?

Try this answer, replacing "US ETF tracking Chinese index" with "European ETF tracking US index". The implication is that the market has a fair price at every moment, and arbitrage ...
nanoman's user avatar
  • 29.5k
4 votes

How should I pay tax for Bitcoin arbitrage?

You may be overthinking this. From a tax standpoint, your situation isn't conceptually much different from buying a used car for $1000 and selling it the next day for $1200. The key is going to be ...
TTT's user avatar
  • 47.2k
4 votes

Why does the DJIA take a dip on the 19th of every month since May?

The Super Bowl Indicator, attributed to Leonard Koppett, states that a if it is won by an original National Football League team (pre AFL/NFL merger) then the market will be up for the year. If the ...
Bob Baerker's user avatar
  • 76.1k
3 votes

For someone who already has enough cash to buy a home, isn't it better to wait and take mortgage when interest rates are high?

Anything else that I may be missing? I can't speak to municipal bond arbitrage, but this piece caught my eye: outgoing interest payments from mortgage pre-tax would be $10,000. Since mortgage is ...
Hart CO's user avatar
  • 70.3k
3 votes

Question about option chain

Above is the snapshot for this Google January 2018 call. The key to this OP's question is 2 fold. Stale quotes, as you can see the bid/ask nowhere near the last trade prices. And the low open ...
JTP - Apologise to Monica's user avatar
3 votes
Accepted

Taxation of foreign currency arbitrage

This is taxed as ordinary income. See the IRC Sec 988(a)(1). The exclusion you're talking about (the $200) is in the IRC Sec 988(e)(2), but you'll have to read the Treasury Regulations on this ...
littleadv's user avatar
  • 171k
3 votes

Why isn't contango in crypto futures markets simply arbitraged away?

We are talking about Billions of dollars of transactions apparently being traded daily, if exchange numbers are believed. So, you can safely assume the presence of arbitrage is an indication of ...
Grade 'Eh' Bacon's user avatar
3 votes
Accepted

Trading stock with very large B/A numbers. How are buyers and sellers selected?

Since you didn't specify a country, this is a US centric answer: National Best Bid and Offer (NBBO) is a Securities Exchange Commission (SEC) regulation requiring brokers to trade at the best ...
Bob Baerker's user avatar
  • 76.1k
3 votes
Accepted

Is this gamble arbitrage opportunity?

The tosses of the two coins (assuming fair coins) are entirely uncorrelated. The payout of one coin has no connection to the payout of the other, even if the odds are the same. Now, if you could get ...
Charles E. Grant's user avatar
2 votes

Is credit card arbitrage still viable?

For many years, any balance transfers cost between 3 and 5 % one-time fee, in addition to the interest, which is often advertized in large letters to be 0%. It is typically in the fine print, so you ...
Aganju's user avatar
  • 37.7k
2 votes

How to execute orders for triangular arbitrage?

How to execute orders for triangular arbitrage? Arbitrage is not allowed in OANDA and most other forex brokers. According to the API License Agreement which I found on the OANDA United States Legal ...
Flux's user avatar
  • 17k
2 votes
Accepted

How to execute orders for triangular arbitrage?

I dont think what you are attempting to do is possible with a retail forex account. Imagine you buy 10,000 EUR/USD, meaning you will profit from a rise in the euro or a fall in the dollar or both. ...
Alan's user avatar
  • 183
2 votes
Accepted

Interest Rate Arbitrage - Pay off loan

If you get your income in the currency you have the new loan in, there is no exchange risk for the future. Assuming that you are able to get and serve that loan, it reduces your cost, so go for it. ...
Aganju's user avatar
  • 37.7k
2 votes

Understanding Arbitrage Strategy (problems and solutions)

If that situation ever existed where I could turn $1000 into $1009 after commissions guaranteed with a total round trip time of seconds I would do that all day long, and so would everybody else. The ...
mhoran_psprep's user avatar
2 votes

401K loan repayment

Why wouldn't you pay it back now, and then invest it inside the 401(k) in that ETF - that way you get the profit tax deferred? Basically, you're taking the same game as if you take on a loan and ...
Aganju's user avatar
  • 37.7k
2 votes
Accepted

"Holding the trade" in fixed income arbitrage

When the bust came in 2008, hedge funds were force to settle out liquid positions (such as treasury bonds) in order to raise cash in order to meet margin calls on their illiquid positions. These ...
not-nick's user avatar
  • 6,410

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