Arbitrage

It is a fix profit situation. When you do arbitrage you fix your profit irrespective of stock movement.

E.g. you have delivery of Stock A. Rate of that stock at NSE is 100 and at BSE is 102.

Short sell it on BSE and Buy it on NSE. You have your Stock at got the profit.

As soon the rate on both the exchanges gets equal, square off both the positions.

(Suppose you square off your position at 95. Profit in short selling INR 7 and loss in Buying INR 5. Net Profit INR 2 .

Suppose you square off your position at 105. Loss in short selling INR 3 and profit in Buying INR 5. Net Profit INR 2 .)

Arbitrage can have plenty of possibilities. It’s up to you how many possibilities you can think about. I have just mentioned one.