Arbitrage is one of the most basic ways to make money online. Every newbie can start making money this way without any need for a big budget right from the beginning. This is a method you can start small and expand along the way as you are increasing your profit.
For those of you who are not yet familiar with Arbitrage, here is a short excerpt from Wikipedia:
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost.
The whole idea behind Arbitrage is to identify a market imbalance and exploit it to turn a profit. For example, a few months ago, I was searching for a new Digital Camera before going on vacation. While searching on different websites, I realized that the camera I wanted was not sold at the same price on every website. I expanded my research to Ebay and quickly found that the exact same camera was selling for over $100 more on Ebay.
A few years ago, another kind of arbitrage was pretty popular among marketers: ppc arbitrage. At that time, people would create campaigns on Yahoo Search or Microsoft Adcenter to push very cheap traffic to their own website. Then, they would display Google Adsense ads on their pages for more expensive keywords to “resell” the clicks for higher paying keywords. Some of them would even buy traffic from Google
Adwords itself and redirect it to Google Adsense! The big search engines quickly caught up with that trend and developed securities to prevent this from happening. Luckily, this is not the only possible arbitrage available online!
Arbitrage is possible when one of these three conditions is met:
- The same item does not trade at the same price on all markets,
- Two items with the same value does not trade at the same price,
- An item with a known price in the future does not trade at its future price today.
As you can see, my digital camera example applies to the first arbitrage condition. What I realized is that it was possible to buy the video camera from one website (Amazon or Pixmania in my example) and resell it on Ebay with a net profit of $100+.
Now, you might not have the money to invest into a digital camera, but the thing is that you don’t even need to buy it beforehand. Actually this would be too risky. Imagine if no one was to buy your camera from Ebay… You would end up with a camera you didn’t want in the first place.
The trick here is to put the item on auction before you even buy it yourself. Just put it on auction with the reserve price of your choice, and once someone purchases it, you can order the camera from the other site. There you have two possibilities, you can either get it shipped to your personal address, then re-mail it to the end-user; or you can even set the shipping address to the 3rd party address on Amazon or Pixmania!
Start searching for market imbalance today and you could start making money with arbitrage as soon as today!
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