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Technology Stocks : Dell Technologies Inc.

DELL 122.55

+4.4%

Nov 21 9:30 AM EST

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To: Jeffry K. Smith who wrote (113204)	3/29/1999 5:28:00 PM
From: PAL	Read Replies (1) of 176387

Jeff: arbitrage is the simulataneous buying and selling of the same or equivalent securities (or in different market) in order to profit from price discrepancy. Arbitrage can take many forms, and ususally only done by professionals in large volume to take advantage of that small price differential. It could be buying/selling stocks and option related, or as recently as the price discrepancy between Netscape and AOL (OK, that is a good example). Prior to the final go ahead by the government, you could buy Netscape cheaper than buying AOL outright. The deal was for each NSCP share will be exchanged for .45 share of AOL. But if you multiply AOL by .45, the result is higher than the price of NSCP. The reason is that there was still uncertainty whether the government would approve the merger. Arbitrageur (one that practice arbitrage) will take advantage of that price discrepancy by buying NSCP and shorting AOL. On option expiration day, there will be a lot of arbitrage tradings. Small investors do not get involved in arbitrage because the cost involved, lack of funds, infrastructures, commission etc. Hope that helps. Paul

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