Arbitrage
The action of profiting from the correction of price or yield anomalies and differentials in similar securities in different markets. It involves taking a position in one market and an offsetting position in another. As prices or yields move back into line positions may be profitably closed out. For example, a stock and its equivalent futures contract may be quoted at different prices; the cheaper one can be bought and sold to the higher priced market. An arbitrageur or arb is an individual or institution practising arbitrage.