Korea and Price Arbitrage (Part 1)

I was in Seoul, Korea over the last few days. It was a great trip except I strained my leg after walking almost half a marathon distance in a single day to cover few significant spots in Seoul.

Korean-made products are sold significantly cheap here if compare to the same products sold in its franchise in Singapore. It is nothing new as many has already taken advantage on the price arbitrage by selling the products that they brought back at slighly lower price than the franchise in Singapore. That creates demand as people always bargain hunting.

While we can easily execute price arbitrage (buy low sell high) in retail market, we can’t do this effectively in stock market. However that doesn’t refrain us from picking up few lessons in stock market (SM).

#1 We always select top sellers products so that we can easily execute price arbitrage without worrying no buyers.
Lesson in SM –Β volume and liquidity are vital to trading success. We should always look for tight bid-ask spread trades.

#2 We should always sell the products fast before the product expiry date.
Lesson in SM –Β  In option market, we don’t buy < 180 days option. Time decay will take a toll on us.

#3 If we can’t sell the product ASAP, it is good to reduce the price to ensure we don’t hold too much inventory.
Lesson in SM – Remember to have a stop loss. We will never know where the price will go. It is not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.

Perhap lesson #4 should be to embrace the value of moderation, never push yourself too much and hurt yourself to achieve more in a shorter time. I should have taken an extra day πŸ˜‰

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