You know the saying “you can’t have your cake and eat it too”? Well, unfortunately, if you choose one, you might miss out a certain aspect of the other. This is known as the opportunity cost. By choosing one option, you give up the benefits you could have received from choosing the alternative.
For example…
Let’s say Mary bought shares from Qantas at the Australian Stock Exchange for ten dollars. Then she saw that the same share trading at ten dollars and twelve cents at Euronext. She decides to sell her Qantas stock at Euronext and profit from the extra twelve cents. This is called arbitrage. Imagine if Mary had a hundred shares, the profit she would make would be twelve dollars.
