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đȘARBITRAGE mini-series: Too Good to be True?
Unlock the secrets of Arbitrage: Turning price gaps into profit!
MoneyMoves
January 23, 2025
In this mini-series, weâre tackling all things arbitrage! By the end of this week, youâll know exactly how to take advantage of arbitrage to build your wealth in 2025. Ready to learn? Letâs go!
Arbitrage Profit - Too good to be true? < weâre here!
Arbitrage: What are the Risks?
Arbitrage: How much do I need?
Does SARS approve Arbitrage?
Return on Investment
How much money are we talking? Over the last few years, weâve made roughly 1% per trade, repeating this process up to the total yearly SARS allowance of R11 million. Hereâs the basic math:
Capital | #Trades | Avg profit per trade | Avg total profit |
|---|---|---|---|
R50,000 | 220 | R500 | R110,000 |
R100,0000 | 110 | R1,000 | R110,000 |
R250,000 | 44 | R2,500 | R110,000 |
R500,000 | 22 | R5,000 | R110,000 |
See below our 2025 trades thus far for investors with R100,000 trading capital:
Trading Date | Capital | Profit after fees | Net profit % |
|---|---|---|---|
2025-01-02 | R100,000 | R1,170 | 1.17% |
2025-01-03 | R100,000 | R1,220 | 1.22% |
2025-01-06 | R100,000 | R1,108 | 1.11% |
2025-01-08 | R100,000 | R1,073 | 1.07% |
2025-01-09 | R100,000 | R1,074 | 1.07% |
2025-01-10 | R100,000 | R1,048 | 1.05% |
2025-01-14 | R100,000 | R960 | 0.96% |
2025-01-15 | R100,000 | R1,008 | 1.01% |
2025-01-16 | R100,000 | R1,050 | 1.05% |
2025-01-17 | R100,000 | R1,007 | 1.01% |
Is It Too Good To Be True?
Arbitrage is a straightforward concept: buy in the cheaper market, sell in the more expensive market, and pocket a (small) profit. Repeat this process as many times as possible.
No trading bots.
No multi-level marketing.
No pyramid schemes.
Simply buying and selling across exchangesâthatâs all there is to it.
Think of it this way: the profit margin per trade is relatively small, about 1%. For example, if you trade with R100,000, youâre making a profit of only R1,000 per trade. However, the magic lies in repetition. By repeating this process, your profits accumulate over time, adding up to a significant amount.
Why Does The Margin Get Smaller Every Year?
Arbitrage leverages price differences between markets: buying in the cheaper market and selling in the more expensive one. However, this margin reduces over time due to basic economic principles:
Increased Demand in the Cheaper Market: More people buying drives the price up.
Increased Supply in the Expensive Market: More people selling drives the price down.
As a result, the cheaper market becomes less cheap, and the expensive market becomes less expensive. This narrows the profit margin.
Why Does It Still Exist?
SARS limits each South African individual to a yearly offshore allowance of R11 million. This means, if you choose to trade with R100,000, you can repeat the process 110 times before hitting the limit. (R100,000 x 110 trades = R11 million).
Once you reach the limit, you can no longer take advantage of these price differences. This limitation prevents the market from becoming fully efficient, leaving some profits on the table.
Fortunately, the SARS allowance resets every calendar year. So, if you finish trading in September, you only need to wait a few months before you can restart the process.
Moral of the story: If there were no SARS limit, the arbitrage margin would be fully exploited, and the opportunity would vanish rapidly. Arbitrage remains profitable because of regulatory constraints, and these constraints help maintain the margin for arbitrage traders in South Africa.
Keen to Arbitrage?
Disclaimer: This is not financial advice.
Who Are We?đ
 The Knowledge Chest | Paul holds an Honours degree in Financial Analysis from Stellenbosch University. With a career spanning investing, accounting, and education, Paul is committed to becoming the best financial planner in South Africa. Despite his many accolades, Paul insists that his greatest achievement is that he is dating a yoga teacher. |
 The Anchor | Ingrid holds a BA Honours in Journalism from Stellenbosch University. She is a self-diagnosed workaholic, excelling in various roles such as marketing, publicity, social media, and strategic partnerships. Ingrid's commitment to promoting wellness and balance extends beyond her professional endeavours, as she is also an avid yoga teacher. |
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