Let's say you bet $100 on the Cubsmoneyline at +110 against the Cardinals at FanDuel. You'd profit $110 with a Chicago win. At the same time, BetMGM lists the Cubs at -105 and the Cardinals -105. You can bet $105 on the Cardinals to win $100, and guarantee either a break-even or $5 profit.
Arbitrage (/ˈɑːrbɪtrɑːʒ/, UK also /-trɪdʒ/) is the practice of taking advantage of a difference in prices in two or more markets – striking a combination of matching deals to capitalize on the difference, the profit being the difference between the market prices at which the unit is traded.
While arbitrage is generally seen as legal and as contributing to market efficiency and liquidity, arbitrage activities are subject to regulations and securities laws to ensure compliance with market rules and prohibit illegal activities such as insider trading and market manipulation.
The example of risk arbitrage we saw above demonstrates takeover and merger arbitrage, and it is probably the most common type of arbitrage. It typically involves locating an undervalued company that has been targeted by another company for a takeover bid.