What Is the Necessary Condition for a Profitable Arbitrage Opportunity to Exist?
A profitable arbitrage opportunity requires a significant price discrepancy for the same asset across two or more markets, such that the profit generated from the simultaneous trades exceeds the total transaction costs, including gas fees and slippage. If the price difference is too small, the transaction costs will consume any potential profit, rendering the arbitrage non-viable.
Glossar
Profitable Option Trade
Leverage ⎊ A profitable option trade within cryptocurrency markets necessitates precise leverage application, balancing amplified returns against heightened exposure to volatility inherent in digital asset pricing.
Opportunity Costs of Mining
Tradeoff ⎊ The Opportunity Costs of Mining represent the foregone value from deploying capital, energy, and physical space toward cryptocurrency mining instead of the next most profitable or socially beneficial alternative use.
Parity Condition
Principle ⎊ The Parity Condition, most famously embodied by the Put-Call Parity theorem, establishes a fundamental, no-arbitrage relationship between the prices of a European call option, a European put option, the underlying asset, and a risk-free bond.
Calculating Opportunity Cost
Cost ⎊ The calculation of opportunity cost in derivatives involves quantifying the forgone return from an alternative deployment of capital, such as holding spot cryptocurrency versus entering a futures contract.
Profitable Option Buying
Benefit ⎊ The primary advantage of profitable option buying is the ability to gain leveraged exposure to favorable price movements in a cryptocurrency with a known, capped maximum loss equal to the premium paid.
Determining Profitable Lifespan
Horizon ⎊ Determining the profitable lifespan establishes the finite time horizon over which a mining asset is expected to generate positive net revenue.
Profitable Griefing Attacks
Exploit ⎊ Profitable Griefing Attacks describe a class of malicious on-chain activity where an attacker executes a sequence of transactions specifically designed to inflict disproportionate financial damage upon a target while securing a net positive return for themselves.
Profitable Volatility Plays
Strategy ⎊ Profitable volatility plays involve implementing options strategies designed to capitalize on changes in implied volatility, rather than predicting the direction of the underlying asset's price movement.
Pre Condition Usage
Condition ⎊ Pre Condition Usage involves formally specifying the exact condition that must hold true for the contract state and input parameters immediately prior to the execution of a critical financial function.
Execution Halting Condition
Condition ⎊ An Execution Halting Condition is any state or instruction encountered during smart contract processing that forces the Ethereum Virtual Machine (EVM) to immediately cease further computation of the transaction.