{"id":12281,"date":"2026-08-22T12:19:55","date_gmt":"2026-08-22T06:49:55","guid":{"rendered":"https:\/\/www.fatakpay.com\/blog\/?p=12281"},"modified":"2026-08-22T12:41:32","modified_gmt":"2026-08-22T07:11:32","slug":"what-is-arbitrage","status":"publish","type":"post","link":"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/","title":{"rendered":"What is Arbitrage? Meaning, Types, Benefits and How Arbitrage Trading Works\u00a0"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Arbitrage is a simple idea at its core: the same asset is priced differently in two places, and someone buys in one and sells in the other at the same moment. This guide covers arbitrage, the types of&nbsp;arbitrage, how it works in Indian markets, and how ordinary investors access it through arbitrage funds.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Key Takeaways<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Arbitrage means capturing a price gap for the same asset across two&nbsp;markets, and&nbsp;understanding this helps you see why the strategy does not depend on market direction.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Knowing how the cash and futures markets are used together helps you follow the most common way this strategy plays out in India.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Factors like spread size and transaction costs play&nbsp;a major role&nbsp;in whether an opportunity is&nbsp;actually worth&nbsp;acting on.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Understanding the legal position helps you separate genuine arbitrage from manipulative practices that are not&nbsp;permitted&nbsp;under securities law.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Comparing manual execution against an arbitrage fund helps you see why most retail investors access this strategy through a fund rather than a trading terminal.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual fund investments&nbsp;are subject to market risks; read all scheme-related documents carefully.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_86 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#What_is_Arbitrage\" >What is Arbitrage?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#What_is_Arbitrage_Trading\" >What is Arbitrage Trading?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#How_Does_Arbitrage_Trading_Work\" >How Does Arbitrage Trading Work?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Types_of_Arbitrage_Trading\" >Types of Arbitrage Trading&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Cash_and_futures_arbitrage\" >Cash and futures arbitrage&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Pure_or_spatial_arbitrage_across_two_exchanges\" >Pure or spatial arbitrage across two exchanges&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Currency_arbitrage\" >Currency arbitrage&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Merger_or_risk_arbitrage\" >Merger or risk arbitrage&nbsp;<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Benefits_of_Arbitrage_Trading\" >Benefits of Arbitrage Trading&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Risks_and_Limitations_of_Arbitrage_Trading\" >Risks and Limitations of Arbitrage Trading&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Is_Arbitrage_Trading_Legal_in_India\" >Is Arbitrage Trading Legal in India?&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Arbitrage_Funds_How_Retail_Investors_Access_Arbitrage_Trading\" >Arbitrage Funds: How Retail Investors Access Arbitrage Trading&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Conclusion\" >Conclusion&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#FAQs_on_Arbitrage_Trading\" >FAQs on Arbitrage Trading&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#What_is_arbitrage_in_simple_words\" >What is arbitrage in simple words?&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Is_arbitrage_trading_risk-free\" >Is arbitrage trading risk-free?&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#Is_arbitrage_trading_legal_in_India\" >Is arbitrage trading legal in India?&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#What_are_the_main_types_of_arbitrage_trading\" >What are the main types of arbitrage trading?&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#What_is_an_arbitrage_fund\" >What is an arbitrage fund?&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/#How_does_a_beginner_get_started_with_arbitrage\" >How does a beginner get started with arbitrage?&nbsp;&nbsp;<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Arbitrage\"><\/span>What is Arbitrage?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Arbitrage is the practice of buying an asset in one market and simultaneously selling it in another where the price is higher, capturing the difference between the two. Because both trades are executed at the same time, the position is hedged, and the profit does not depend on whether the market rises or falls. In Indian markets, the most&nbsp;common form&nbsp;of this strategy is buying a stock in the cash market while selling its futures contract.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Arbitrage_Trading\"><\/span>What is Arbitrage Trading?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Arbitrage trading, in practical terms, is simply the act of executing both legs of an arbitrage position, the purchase and the offsetting sale, in the market at the same time to lock in a price difference. This differs from ordinary directional trading in one key respect: the trader is not betting on where the price goes next, only on the gap between two prices for the same asset converging as expected.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Does_Arbitrage_Trading_Work\"><\/span>How Does Arbitrage Trading Work?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The mechanics follow a consistent sequence regardless of which specific markets are involved.&nbsp;<\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li>Spot the same asset priced differently in two markets.&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li>Buy in the cheaper market.&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li>Sell simultaneously in the costlier market.&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"4\" class=\"wp-block-list\">\n<li>Hold both legs until the prices converge.&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"5\" class=\"wp-block-list\">\n<li>Book the difference, net of costs.&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">As a worked example of how arbitrage trading works using the cash and futures markets, understanding&nbsp;what the Nifty 50 is&nbsp;helps frame this: suppose a stock trades at Rs. 1,000 in the cash market and its one-month futures contract trades at Rs. 1,015. A trader buys the stock in the cash market and simultaneously sells the futures contract. As the contract nears expiry, the futures price converges toward the cash price, and the trader closes both legs, capturing the Rs. 15 spread, minus brokerage, transaction charges, and taxes.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Types_of_Arbitrage_Trading\"><\/span>Types of Arbitrage Trading&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Arbitrage takes several forms depending on which two markets or instruments are involved, and Indian investors most commonly&nbsp;encounter&nbsp;these types of&nbsp;arbitrage.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cash_and_futures_arbitrage\"><\/span>Cash and futures arbitrage&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The most&nbsp;common form&nbsp;in Indian markets, buying a stock in the cash segment while selling its futures contract, then closing both positions as prices converge near expiry.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pure_or_spatial_arbitrage_across_two_exchanges\"><\/span>Pure or spatial arbitrage across two exchanges&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Buying an asset on one exchange and selling it on another where it trades at a higher price, though this has become rarer as electronic trading has narrowed such gaps significantly.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Currency_arbitrage\"><\/span>Currency arbitrage&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Exploiting temporary pricing differences for the same currency pair across different markets or platforms.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Merger_or_risk_arbitrage\"><\/span>Merger or risk arbitrage&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Trading the shares of companies involved in an announced merger or acquisition, betting on the deal&#8217;s completion at the agreed terms rather than on a simple price gap.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_Arbitrage_Trading\"><\/span>Benefits of Arbitrage Trading&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This strategy offers a distinct risk-return profile compared with directional investing strategies.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Low directional&nbsp;risk<\/strong>, because&nbsp;both legs of the position offset each other.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Returns&nbsp;largely independent&nbsp;of whether the market rises or falls<\/strong>, which sets this strategy apart from most equity investing; this is part of why arbitrage sits among&nbsp;the&nbsp;different types&nbsp;of investments available&nbsp;to Indian investors seeking lower correlation with broad market swings.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Professional execution in fund form<\/strong>, offering access to a strategy the retail investor&nbsp;generally cannot&nbsp;replicate alone through manual execution.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This strategy should never be described as risk-free profit; it is more accurately described as&nbsp;low risk&nbsp;or hedged, since real risks&nbsp;remain&nbsp;even after both legs are executed.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Risks_and_Limitations_of_Arbitrage_Trading\"><\/span>Risks and Limitations of Arbitrage Trading&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">An honest look at the limitations&nbsp;matters, since&nbsp;much of the content on this topic overstates the safety of this strategy.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Spreads are thin and shrink<\/strong>&nbsp;as more market participants compete for the same opportunities.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Transaction costs, brokerage, and taxes<\/strong>&nbsp;can erase the gap, especially on smaller spreads.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Execution risk<\/strong>&nbsp;exists if the two legs of the trade do not fill together at the intended prices.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Returns depend on market volatility<\/strong>, so this strategy tends to generate thinner gains in calm, low-volatility markets where price gaps are smaller and rarer.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_Arbitrage_Trading_Legal_in_India\"><\/span>Is Arbitrage Trading Legal in India?&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, arbitrage trading&nbsp;is legal in India when conducted within the rules of SEBI and the exchanges. Manipulative or misleading practices&nbsp;remain&nbsp;prohibited under securities law regardless of whether they are framed as arbitrage, so legitimate arbitrage trading relies on genuine, simultaneously executed price differences rather than any form of market manipulation.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Arbitrage_Funds_How_Retail_Investors_Access_Arbitrage_Trading\"><\/span>Arbitrage Funds: How Retail Investors Access Arbitrage Trading&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For most individual investors, a trading&nbsp;terminal&nbsp;and the split-second execution this strategy requires are simply not practical. This is where arbitrage funds fit in, a hybrid mutual fund category that professionally executes cash-futures arbitrage strategies on behalf of pooled investors. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Since these&nbsp;funds are still structured pooled vehicles at their core, which is&nbsp;what mutual funds are, they let retail investors access this strategy through a simple fund purchase rather than direct trade execution of their own.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Arbitrage is about price gaps, not market direction, and for most investors the practical route into this strategy is a fund, not a trading terminal. The strategy rewards patience and execution discipline more than any prediction about where markets are headed next.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs_on_Arbitrage_Trading\"><\/span>FAQs on Arbitrage Trading&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_arbitrage_in_simple_words\"><\/span>What is arbitrage in simple words?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Arbitrage means buying an asset in one market and simultaneously selling it in another where the price is higher, capturing the difference at&nbsp;low risk.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_arbitrage_trading_risk-free\"><\/span>Is arbitrage trading risk-free?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No, arbitrage trading is&nbsp;low risk&nbsp;rather than risk-free, since execution risk, transaction costs, and thin spreads can all erode or&nbsp;eliminate&nbsp;the expected gain.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_arbitrage_trading_legal_in_India\"><\/span>Is arbitrage trading legal in India?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, arbitrage trading&nbsp;is legal in India&nbsp;as long as&nbsp;it is conducted within SEBI and exchange rules, without any manipulative or misleading practices.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_main_types_of_arbitrage_trading\"><\/span>What are the main types of arbitrage trading?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The main types include cash and futures arbitrage, pure or spatial arbitrage across exchanges, currency arbitrage, and merger or risk arbitrage.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_arbitrage_fund\"><\/span>What is an arbitrage fund?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">An arbitrage fund is a hybrid&nbsp;<a href=\"https:\/\/www.fatakpay.com\/invest-in-mutual-funds\" target=\"_blank\" rel=\"noopener\"><strong>mutual fund<\/strong><\/a>&nbsp;category that professionally executes cash-futures arbitrage trading strategies on behalf of pooled retail investors.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_does_a_beginner_get_started_with_arbitrage\"><\/span>How does a beginner get started with arbitrage?&nbsp;&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">A beginner typically accesses this strategy through an arbitrage fund rather than executing trades directly, since it removes the need for a trading terminal and manual execution.&nbsp;<\/p>\n\n\n\n<script type=\"application\/ld+json\"> \n{ \n  \"@context\": \"https:\/\/schema.org\/\", \n  \"@type\": \"BreadcrumbList\", \n  \"itemListElement\": [{ \n    \"@type\": \"ListItem\", \n    \"position\": 1, \n    \"name\": \"Home\", \n    \"item\": \"https:\/\/www.fatakpay.com\" \n  },{ \n    \"@type\": \"ListItem\", \n    \"position\": 2, \n    \"name\": \"Blog\", \n    \"item\": \"https:\/\/www.fatakpay.com\/blog\/\" \n  },{ \n    \"@type\": \"ListItem\", \n    \"position\": 3, \n    \"name\": \"Mutual Funds\", \n    \"item\": \"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/\" \n  },{ \n    \"@type\": \"ListItem\", \n    \"position\": 4, \n    \"name\": \"What is Arbitrage? Meaning, Types, Benefits and How Arbitrage Trading Works\", \n    \"item\": \"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/\" \n  }] \n} \n<\/script>\n\n\n\n<script type=\"application\/ld+json\"> \n{ \n  \"@context\": \"https:\/\/schema.org\", \n  \"@type\": \"BlogPosting\", \n  \"mainEntityOfPage\": { \n    \"@type\": \"WebPage\", \n    \"@id\": \"https:\/\/www.fatakpay.com\/blog\/mutual-funds\/what-is-arbitrage\/\" \n  }, \n  \"headline\": \"What Is Arbitrage? Meaning & Types\", \n  \"description\": \"Learn what is arbitrage trading, the types of arbitrage used in Indian markets, how the cash-futures strategy works, and how retail investors access it.\", \n  \"image\": \"https:\/\/www.fatakpay.com\/navbar-assest\/Logo-2.png\", \n  \"author\": { \n    \"@type\": \"Organization\", \n    \"name\": \"FatakPay\", \n    \"url\": \"https:\/\/www.fatakpay.com\" \n  }, \n  \"publisher\": { \n    \"@type\": \"Organization\", \n    \"name\": \"FatakPay\", \n    \"logo\": { \n      \"@type\": \"ImageObject\", \n      \"url\": \"https:\/\/www.fatakpay.com\/navbar-assest\/Logo-2.png\" \n    } \n  }, \n  \"datePublished\": \"2026-08-22\", \n  \"dateModified\": \"2026-08-22\" \n} \n<\/script>\n\n\n\n<script type=\"application\/ld+json\"> \n{ \n  \"@context\": \"https:\/\/schema.org\", \n  \"@type\": \"FAQPage\", \n  \"mainEntity\": [{ \n    \"@type\": \"Question\", \n    \"name\": \"What is arbitrage in simple words?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"Arbitrage means buying an asset in one market and simultaneously selling it in another where the price is higher, capturing the difference at low risk.\" \n    } \n  },{ \n    \"@type\": \"Question\", \n    \"name\": \"Is arbitrage trading risk-free?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"No, arbitrage trading is low risk rather than risk-free, since execution risk, transaction costs, and thin spreads can all erode or eliminate the expected gain.\" \n    } \n  },{ \n    \"@type\": \"Question\", \n    \"name\": \"Is arbitrage trading legal in India?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"Yes, arbitrage trading is legal in India as long as it is conducted within SEBI and exchange rules, without any manipulative or misleading practices.\" \n    } \n  },{ \n    \"@type\": \"Question\", \n    \"name\": \"What are the main types of arbitrage trading?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"The main types include cash and futures arbitrage, pure or spatial arbitrage across exchanges, currency arbitrage, and merger or risk arbitrage.\" \n    } \n  },{ \n    \"@type\": \"Question\", \n    \"name\": \"What is an arbitrage fund?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"An arbitrage fund is a hybrid mutual fund category that professionally executes cash-futures arbitrage trading strategies on behalf of pooled retail investors.\" \n    } \n  },{ \n    \"@type\": \"Question\", \n    \"name\": \"How does a beginner get started with arbitrage?\", \n    \"acceptedAnswer\": { \n      \"@type\": \"Answer\", \n      \"text\": \"A beginner typically accesses this strategy through an arbitrage fund rather than executing trades directly, since it removes the need for a trading terminal and manual execution.\" \n    } \n  }] \n} \n<\/script>\n","protected":false},"excerpt":{"rendered":"<p>Arbitrage is a simple idea at its core: the same asset is priced differently in two places, and someone buys in one and sells in the other at the same moment. This guide covers arbitrage, the types of&nbsp;arbitrage, how it works in Indian markets, and how ordinary investors access it through arbitrage funds.&nbsp; Key Takeaways&nbsp;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[697],"tags":[],"class_list":["post-12281","post","type-post","status-publish","format-standard","category-mutual-funds"],"_links":{"self":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/12281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/comments?post=12281"}],"version-history":[{"count":2,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/12281\/revisions"}],"predecessor-version":[{"id":12292,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/posts\/12281\/revisions\/12292"}],"wp:attachment":[{"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/media?parent=12281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/categories?post=12281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fatakpay.com\/blog\/wp-json\/wp\/v2\/tags?post=12281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}