Options Arbitrage: Overview, 5 Strategies, Benefits, Risks, and Profitability
Options arbitrage is a popular strategy among professional traders and institutions. It aims to capture low-risk opportunities created by short-term pricing gaps in the options market. Modern options arbitrage became more widely used after advanced option-pricing models emerged in the early 1970s. The Black-Scholes model, introduced in 1973, played a major role in this shift. These opportunities usually don’t last long. Still, they reveal a lot about how options are priced and how markets correct themselves. Understanding options arbitrage also helps traders build a stronger base before moving into more advanced options strategies. Pro Tip: Use Strike Money for real-time market charts and technical analysis. What Is Options Arbitrage? Options arbitrage is a trading strategy that tries to profit from a pricing mismatch between related option contracts or between an option and its underlying stock or index. The strategy is often described as risk-free or very low risk because the ...