Hacker News Reader

Comment by fsckboy | Hacker News Reader

the term they meant is texas lottery "riskless arbitrage".

Buying a whole pizza, then standing in front of the pizza shop shelling the slices for a net profit is arbitrage. but it's risky because you might not be able to sell enough of them (before they get cold, say) to earn back your investment.

when you talk about an arbitrage that is guaranteed profit, that is a riskless arbitrage.

View on HN

How can lottery tickets be riskless? I mean you need to draw winning tickets too. Even if the EV is over 1 you can end up under 1 in practice?

They bought every number

Isn't the jackpot only a fraction of the revenues from all tickets sold?

Yes but progressive jackpots accumulate if not won in previous drawings.

In this particular lotto, 4% of all possible numbers were bought in a typical period. So it's not truly riskless, but there was definitely a positive expected value.

Oh ... ye well that solves it.

This is not that

Really? Doesn’t that describe every kind of store where you don’t create the product yourself as an arbitrage? You’re just buying items from a supplier and reselling to make a profit

For sure. Buying wholesale and selling retail is one of the most common/accessible windows of arbitrage you can find.

Buying wholesale and selling retail isn't arbitrage. Wholesale pricing is cheaper precisely because it is a bulk price. There is an overhead to selling individual units. A retail operator adds value by introducing individual unit liquidity, with the price premium of the individual unit offsetting the risks involved in paying the fixed costs of retail (rent etc.), not selling all the inventory, and having enough left over for a profit.

probably best to understand the way people use the term as a risk spectrum, from riskless arbitrage where there is no window for losing money, through say a real estate deal where you find a seller at a good price, and you find a buyer at the market price, and you insert yourself in the middle (a perfect houseflip) even though you don't have the capital to suffer the loss if things get screwed up, to an antique shop that buys on speculation and sells to reliable clients. A pawn shop is arbitrage too.

generally people mean by arbitrage that you enter into a transaction having both a seller and a buyer in mind, or you have two liquid markets with different prices.

Reply on news.ycombinator.com