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Trading

What Is Arbitrage?

Profiting from price differences of the same asset across different markets.

Definition

Arbitrage involves buying an asset where it's cheap and selling where it's expensive, capturing the price difference as profit. In DeFi, arbitrageurs help maintain price consistency across venues.

How It Works

Monitor prices across markets. When a discrepancy appears, buy low and sell high simultaneously. In synthetic markets, this means trading between DEX prices and redemption values.

In Continuum

Arbitrageurs keep Continuum tokens pegged to oracle prices. If DEX price < oracle, buy tokens and redeem. If DEX price > oracle, mint and sell. Liquidity for L/S tokens is concentrated in Meteora DLMM pools, providing tight spreads for efficient arb execution. Competitive arbitrageurs use Jito bundles — MEV-protected transaction bundles on Solana — to execute multi-step arb atomically without being frontrun.

Related Terms

Oracle

A service that brings off-chain data (like prices) onto the blockchain.

Redemption

The process of burning synthetic tokens to receive back the underlying collateral.

More Trading Terms

LiquidationLeverageFunding RatePerpetual Futures (Perps)

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