Arbitrage basics | Finance & Capital Markets | Khan Academy

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Arbitrage Basics. Created by Sal Khan.
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Finance and capital markets on Khan Academy: Options allow investors and speculators to hedge downside (or upside). It allows them to trade on a belief that prices will change a lot--just not clear about direction. It allows them to benefit in any market (with leverage) if they speculate correctly. This tutorial walks through option basics and even goes into some fairly sophisticated option mechanics.
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[@ehmt-19]

Thank you! I need things explained to me like a 3 yr old and you delivered. haha. Thanks again

[@lechat8533]

@EHMT LOL... The same here :)

[@theleagueofshadows100]

Lol no doubt about it! lol well said. 👍🏼✌🏼

[@soulfulwarrior8276]

Apparently you needed it explained to you like everyone else who viewed the video. So like how it was delivered or not, now you have a most basic idea.

[@ShalomMasawi]

I am the same, I was reading my lecutre notes and I couldn't understand arbitrate until i saw this video, now it makes sense hahaha

[@tinadoval8005]

Dude. SAME

[@Malconomics]

This works perfectly as long as the fees and charges don't eat up your profit.

[@finladder]

kzbin.info/www/bejne/hpenioeGiLyHec0

[@Daniel-pc2ov]

you must account for this in your net income

[@RealStuntPanda]

Perfect, simple explanation of arbitrage and explains why Luna and UST tanked. People paid 90 cents for UST, traded it for $1 of Luna but by the time they can sell that Luna it was only worth 80 cents; thus they didn't arbitrage, they lost-itraged.

[@Wayneexchange]

😂😂

[@QuantumPeter]

Dude, this is like two touching bodies with different temperatures.The cold becomes hotter,and the hot becomes colder until they reach an equilibrium!!! DUUUUUDE.

[@ChessNetwork]

Risk free assuming you don't wreak your bike while traveling. :)

[@NolePTR]

Oi Chess Network, hello.

[@tobiassarrau6870]

@@adia.413 Thats 2 apples in the first store (y)

[@tobiassarrau6870]

Unless someone used arbritage

[@kevincurtis9744]

lol lol

[@EatingCat69]

Basically 11 years ago you're dumb at thinking

[@sumeetpandey6521]

This can also be a case for two different economies involved in trade.

[@jeremychia3048]

i hope you keep doing this, if this works for me..im sure it works for most of the people out there. Well done.

[@betinamountou7592]

Thanks for your help because I now have an idea of what arbitrage is all about...

[@ihsanbaig2235]

great example, jazakAllah

[@grpere1]

Khan Academy makes everything so much clearer compared to any textbook.

[@ceciliandolo946]

We can also say that Arbitrage is capitalization on discrepancies of the quoted prices

[@marissacecotpetersen7856]

Thank you for the upload. Excellently put and easy to understand :)

[@sitizain766]

THANK YOU FOR THE WONDERFUL EXPLAINATION

[@Metrothunder3]

Great explanation. Need that for my 7 exam.

[@cre8tiveuniverce788]

Excellent tutorial explanation very good exceptional thanks

[@KellyPosey]

thanks for this explanation! It's clear to see now one of the ways which the current system allows for manipulation for profit

[@llamacorn4604]

I am so happy I found this video.

[@nassisclasses1868]

Thank u...sir...clear understanding😊😊👍

[@soulfulwarrior8276]

Thanks, great, easily understandable explanation.

[@loonicstradingfrancoisabley]

Khan revealed the secret of financial markets! It’s the fundamental reason of why trading exist!

[@thyra7xarisosfp]

thank you. Glad I found this channel!!

[@forfun.369]

perfect explanation 👏👏👏

[@horizontbeskrajneinovacije6440]

Thank You...great video...

[@basakyenelyalovaistanbulre1192]

You should make finance videos for regular people:) with no economics background.

[@Khonic23]

Başak Yenel it’s all pretty simple without an Econ background. Econ in itself is very simple just look up Econ basic videos here and you’ll get the basics very quickly

[@zwewinthtin7748]

Thank u

[@linchianne]

oh Khan, here I am watching your stuff four years after graduating high school ;P

[@vonivanearlsambajon1001]

Very Helpful...

[@jhovsuico8533]

Not certain about the points made but ,if anyone else wants to discover how much money can you make matched betting try Grathaw Arbitrage Software Expert (do a google search ) ? Ive heard some awesome things about it and my co-worker got excellent success with it.

[@StocksIn60Seconds]

The basic premise of selling options right here...

[@jhescore]

this sounds like basic business to me, no ? buying low and selling high ? although i am ignorant, explaining why im here in the first place. an example with real financial situations would be more helpful in my opinion.

[@Tetris4wider]

Japan has a share of apple for 99.99. US (on the other side of the world) has Apple trading at $100. If you have a computer program that automatically finds these price differences you could guarantee a 1 cent profit if you bought from Japan at 99.99 and sold at 100 exactly in the US

[@usahouses8817]

Cool. Very interesting. Do you know of any arbitrage spreadsheet calculator formulas for currencies, cryptocurrencies, etc?

[@finladder]

kzbin.info/www/bejne/hpenioeGiLyHec0

[@GlassEyeGaming]

Hey Khan Academy.... what kind of software are using to create this video? I'd like to make videos using this same method. Thanks in advance if you reply. :-)

[@Mrpastry909]

Nice and simple. Thanks!

[@hobbylos3962]

helps to understand the concept, but would like to have a more detailed explaination

[@guitarista1994]

Thank you, that was very well explained

[@zdenkasun3803]

Thank you :)

[@user-bo7xg4oy4i]

I recommend the strategy

[@lechat8533]

Great explanation. Thanks a lot :)

[@learnanddeliver]

Awesome, this is very clear. Thanks Sal. I have an exam coming up on a Harvard case. This will help me to crack the arbitrage related questions.

[@angofin]

Arbitrage is King.

[@MithunPawar_ShreeHari]

Good basic to understand with examples.

[@suebeewsas]

Mithun Pawar Good day!. Another resource I also found useful for free sports arbitrage software was Grathaw Arbitrage Software Expert.. Google and you will find it.

[@itsok2me]

+Mithun Pawar Hey I love Mrs. Khan video, particularly this video about calculate arbitrage. Another resource I also found helpfull for gambling sites is Grathaw Arbitrage Software Expert - it will be on google if you need it.

[@jewfrogabe19]

really handy in the crypto exchange world. thanks man

[@usahouses8817]

The challenge there is the crypto exchanges either block trading, depositing or withdrawals when the best opportunities look like they should be available. I'd really love a nice spreadsheet with some nice formulas built in to calculate the cryptos and fiat currency trades and transfers.

[@maldighaithir]

That’s assuming no friction, as lets say gas cost from market A to B is lower than the difference between apple prices

[@vijaysah277]

ooh apples are so epensive bob!

[@DewTime]

My wife and I are practicing this right now. We left the Bay Area to save a ton of money on rent. Just made a video about it explaining some of the nuances of it. I highly encourage people to leave those HCOL areas!

[@zaynumar0]

I'm going to check out your channel

[@inametieffiom6803]

How do i learn. Where's the video for it?

[@johnnyuncle4461]

Excellent !!!!!!!!!!

[@finladder]

kzbin.info/www/bejne/hpenioeGiLyHec0

[@wjddlwjd]

Thnx

[@katiabarretto1802]

You have the best teaching videos. ALWAYS very clearly explained. Been watching your videos for about a year now for post-graduate classes.

[@nrs6956]

So essentially is a question of "timing" dealing with supply and demand.

[@elijahdelcastillo9476]

Excellent explanation !

[@matthewellis3004]

I think buying and selling vehicles would be a good example of arbitrage to deploy to make money for the ambitious type

[@jean-baptistedubois9940]

Thank you!

[@PratibhaArora]

please make a video on hedging too..it would be really helpful

[@brianlaforge5018]

+Pratibha arora i think it's when you say take out a mortgage and buy a house then lease your house to someone for as much as your mortgage payment... you've then "hedged" your investment and the tenant is effectively buying you your house.. get it?

[@finladder]

kzbin.info/www/bejne/omfMqYZqi8eKj80

[@meshackduodu2551]

great insight

[@fateenibrahim3423]

THIS HAS HELPED ME FINALLY UNDERSTAND THE UIP CONDITION THANK YOU!

[@Strawberrysurf]

Awesome as a bright sunny day!!! Thanxie!!!

[@utkarsh2301]

Eureka.

[@hayleybonnell4409]

what about the UK taxes on arbitrage?

[@aviationsolution180]

Bro this is on point

[@CendyAbiero]

Well done!

[@DavidDolynny]

Very Helpful!

[@rizwankhanchauhan7746]

any algotrading software name for arbitrage trading plzzzz???

[@JoseHidalgoH]

there are bots like Gekko that let you tune/develop your strategy, you still need to code the strategy but the tools are mostly ready

[@Richdadpoordad-oh8gp]

I love you I genuinely love you

[@user-lj7hx9yr2g]

Thanks:)

[@user-sv2ds1gs3w]

He is really good with that mouse

[@Swanesang91]

Thanks bra!

[@fleshcookie]

I missed very much the pointer in the last 9 or 10 videos.

[@TheConceptElectro]

selling at level 5 on perspected from lvl 2

[@loudrockacdc]

I'm confused. Why do prices go down when supply goes up? Doesn't supply go up when sellers want to sell more at higher prices?

[@asadreza94]

loudrockacdc when you have excess supply and your current demand doesn't meet the supply the price goes down so as to create more demand. So say the supply was 20 apples but the demand was for 15. You have 5 apples in excess which need to find a buyer, you will lower your price quotation per Apple to reach an equilibrium state where the supply is evenly met by demand.

[@loudrockacdc]

That makes sense, thank you!

[@jmitterii2]

Loudrockacdc, you're right too if considering the effects over time, that yes, more demand in one market begins, more sellers will enter that market when prices begin to go up. You can also have more sellers enter a market if they see volume of sells go up, they need to find a market that is quickly getting rid of apples at a steady price, no big leaps up or down. New sellers may find that cheaper market better as they have lots of quantity and will maximize their profits by having a stable price and make money off volume of sales... the higher price market means more of their apples don't get sold quick enough and just rot, or more expense finding more markets to deliver and try and sell their apples. So in this scenario, the key phrase: "all other things being equal"... meaning quantity supply is the same for both markets, and no other new quantity supplied by some new supplier or by the same dealers are available over the period of time in conjecture. That way you get the idea in the short run that markets malfunction. Over time they eventually may correct to a fair price that nobody is making a risk free return, detriment that some people are getting screwed because no extra value benefit is being generated. In the real world you can have many things happen that may make arbitrage last longer, or shorter. Many reasons why it could last longer, such as suddenly volume kicks up, and guess what that dealer in the cheaper market has a warehouse of more apples: more supply and wow! I'm getting rid of these apples quicker at this price, I'm not changing the price at all, I want these sold, and I'm still maximizing my profits (MR = MC at this price, if I raise the price my quantity demanded will go down). So they get some more to sell. So price may stay the lower $1 Now in the buyer market across town, they're getting inundated by apples, and not many are buying them, so they simply won't even buy anymore. Only sell them for $1.50. Why not drop the price? Well, they have enough quantity supplied minus the time it takes before an apple rots and becomes unsellable that their marginal revenue equals marginal cost. They're maximizing their profits still. Then you make ask why does the higher priced market keep selling their apples at a higher price? Who are the suckers? And why? This is where other economic effects that could occur (when you don't state all things being equal), that there's a prestige factor from buying apples from that market compared to the cheaper market... the tents look better, its nearer to well to do peoples' home and allows you to mingle with people of means (snob appeal), perhaps they advertised how wonderful the apples are, and everyone love them, everyone's doing it. Despite the fact they're the same quality apple if not the same damn apples from the cheaper market sold to the expensive market (band wagon appeal). The two markets are considering one can buy and sell; that the markets will always have a buying and selling price equal. Never is the case though. Often markets will never buy, most are only going to sell whatever supply they have; they have a separate whole-sell market for their buying. Or if they are primarily a selling market, but do buy, they limit their quantity buying; their buying is strictly limited, and always lower than the price at which they're selling. So if they get a flood of sellers asking them to buy their apples, they'll buy slightly lower than what they themselves are selling at, and stop buying their apples all together once they have reached a certain quantity in inventory. But they'll continue themselves to sell the apples, and at a charge up from whatever price they themselves bought at. Markets are more complicated than described. This is just providing insight that yes in fact in short term you have price disparity where you can make money risk free. A form of rent seeking. This can happen in any markets including currency exchanges, housing, stocks, cars, etc. The idea is that markets will eventually find some reasonable stable price that doesn't allow people to screw each other risk free for a long time, only for a little while. But there are other possible outcomes that can make the screwing last longer, or shorter: The high price market refuses to buy apples from others, but only sell their own apples, until their quantity supplied (inventory) is low and they need more apples stocked up for sell. They advertise using various persuasive techniques. The cheap market is engaging in a price war dumping their apples, or seeks to make money off volume of sales because they have lots of supply of apples. And many other phenomena.

[@finladder]

kzbin.info/www/bejne/d5q0dXmJeKd8o5Y

[@bushrayasmeeneverydayvlogs2793]

Thankyou so much

[@omthar80]

how can we prove it completely?

[@davidcho4399]

brilliantly explained

[@eyadelkholy6371]

now I like trade

[@Barbaryotaku]

How do you like dem apples

[@DonBiSuperKiss]

Clicked on this vid to learn about EXO.... but wow, this is interesting ^^

[@valanes]

How did you write the video out like that?

[@haton3847]

He loves apples so much 🍏

[@nigeldix5614]

I'm told this company is 1 to 2 years old, so why are the comments as old as 8 years ago?

[@lechat8533]

@Nigel Dix This company was established in 2008! This video was uploaded in 2011! So, where`s the problem???

[@abdulrashid2023]

So Business = Arbitrage ?

[@tiuri4701]

Thank u sir

[@rogjerr]

Now explain how to buy shares from market A then sell those shares in market B ...??

[@mitrabor3043]

For which amounts of x this transaction is an arbitrage? { 0,1,x,4} /{0,1,2,3}

[@BryanGuerratv]

Apple Arbitrage, you say? 🤑

[@muhammadismael2283]

David Peterson created ARB coin this will be $1000+++ per 1 coin soon

[@zaynumar0]

Everyone wants to get money. Genuine question: is there a bank/organization that gives free millions to people? 😂 Where do big banks get their money from. Can't the federal reserve just print infinite money?

[@BREAKocean]

How's life khan

[@tommyofdarkness4717]

Unfortunately this is called return fraud if you do this at a grocery store

[@ohm1010]

@ChessNetwork or we assume no transaction costs :P

[@MD-cu6wq]

as long as you don't get hit by a bus on the way to where the apples are more expensive

[@LacedHeat]

its not risk free as you still have to sell the apples. If you arent able to sell your money is then tied up.

[@erhardvespucci9803]

In pure arbitrage the trader would short the apples (basically selling them before owning them) while simultaneously buying them for cheaper making a risk free profit

[@LacedHeat]

@@erhardvespucci9803 clearly that doesnt always work as you saw with what happened with the Gamestop stock

[@ravon1982]

Rightttt I get it know terra luna is most def a ponzi then lol

[@kajallison8896]

X 1.5 speed!!

[@DirtyTaxman]

[@DaddyGuiver]

This is just the basics in any business. Buy Low - Sell High So people now call it “Arbitrage”. Big deal! What is not mentioned here is how you need to firstly identify the demand and find a source to buy low.

[@gpalaces]

DJVlad

[@freelancer3965]

it's very simple and easy but i dont understand -_-

[@calvinmarksman6921]

Huge flaw in that logic. The second store is selling the apples for $1.50. They did not pay that.

[@marselluswallace3672]

The movie brought me here .

[@congratz9396]

LoveU :-*

[@o40004000]

0.0

[@debbiespohn7820]

❤️💎❤️