To calculate arbitrage profit, use the formula by multiplying the spot price (S) by the ratio of exchange rates E2/E1E2/E1E2/E1, then subtract any transaction costs (C).
Contents
The Arbitrage Profit Calculator helps identify opportunities to make risk-free profits by taking advantage of price differences between two or more markets.
This tool is useful in fields like cryptocurrency, forex trading, and betting, where different prices exist for the same asset in different markets. By using this calculator, you can quickly determine whether an arbitrage opportunity exists and what the potential profit would be.
Formula:
| Variable | Description |
|---|---|
| AP | Arbitrage Profit |
| S | Spot price or initial investment |
| E1 | Exchange rate in the first market |
| E2 | Exchange rate in the second market |
| C | Transaction costs or fees |
Solved Calculation:
Example 1:
| Step | Calculation |
|---|---|
| Spot Price (S) | $1,000 |
| Exchange Rate 1 (E1) | 1.2 |
| Exchange Rate 2 (E2) | 1.3 |
| Transaction Cost (C) | $20 |
| Arbitrage Profit Calculation | |
| Result | $1083.33 – 20 = $63.33 |
Answer: The arbitrage profit is $63.33.
Example 2:
| Step | Calculation |
|---|---|
| Spot Price (S) | $500 |
| Exchange Rate 1 (E1) | 0.9 |
| Exchange Rate 2 (E2) | 1.1 |
| Transaction Cost (C) | $15 |
| Arbitrage Profit Calculation | |
| Result | $611.11 – 15 = $96.11 |
Answer: The arbitrage profit is $96.11.
What is Arbitrage Profit Calculator?
An Arbitrage Profit Calculator is a tool used to calculate potential profits from arbitrage opportunities, where a price difference exists between two or more markets. Arbitrage allows traders to buy an asset in one market and simultaneously sell it in another for a profit, taking advantage of the price differences.
How to Calculate Arbitrage Profit:
The basic formula for calculating arbitrage profit is:
Arbitrage Profit = (Selling Price – Buying Price) – Transaction Costs
For crypto arbitrage, the profit depends on the price differences between cryptocurrency exchanges. Tools like the crypto arbitrage profit calculator simplify this by automatically factoring in fees and exchange rates.
3-Way and 2-Way Arbitrage:
In 3-way arbitrage (also called triangular arbitrage), you trade three different currencies in a cycle to exploit price differences, while 2-way arbitrage involves simpler buy-sell scenarios between two assets. Calculators such as the 3-way arbitrage calculator or 2-way arbitrage calculator help compute potential profits in these cases.
Is Arbitrage Risk-Free?
Arbitrage is generally considered a risk-free profit strategy, but only if executed perfectly without slippage or high transaction fees. Tools like the risk-free arbitrage profit formula or arbitrage betting finder are often used to minimize risks and ensure profits are possible.
Final Words:
By using apps, tools, or calculators like arbitrage profit calculator in Excel, traders can quickly calculate profits from different markets or opportunities, such as forex, crypto, or betting arbitrage.
