There are some differences between Speculation and arbitrage. They are below:
Speculation
Buying and selling of financial instruments and derivatives in the hope of a profit from anticipated changes in the price of instruments.
Profit is the differences between prices at different times.
Risk is high .
It is a necessary evil.
May or may not hold securities / commodities.
Arbitrage
Simultaneous buying and selling of securities or commodities to make profit on the differences in the prices prevailing in the two markets.
Profit is the difference between prices prevailing in two different markets.
Risk is relatively less (if executed properly).
It is a legal way to make money.
Always hold securities / commodities.
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