V. 22:6 (59): Q&A by Don Bright
With regard to arbitrage, I think I understand the reasons why someone trading from a retail account cannot realistically (or should I say consistently) capture arbitrage opportunities. Based on what I can gather, the barriers to entry for “the little guy” are:
1. Cost. This includes commissions but also includes the effects of the bid/ask spread for retail customers.
2. Speed of execution. This includes not only the ability to spot the opportunity quickly, but also the speed with which you get filled.
Based on your experience, is this correct? Which of these two is the biggest obstacle? I’m sure there are other barriers, and I would certainly appreciate your thoughts on what the other (potential) obstacles are. Thanks — Marcus
Arbitrage takes many forms, and most of them have little or nothing to do with “speed of execution.” I realize that there are a few people who try to play the minor disparities between markets like a video game, but in my opinion, this is way too difficult for such a small amountof gain. . .