Arb, short for arbitrage, is the system of hand signals used to communicate buy and sell information in an open-outcry trading environment.
Traders usually flash the signals quickly across a room to make a sale or a purchase. Signals that occur with palms facing out and hands away from the body are an indication the gesturer wishes to sell. When traders face their palms in and hold their hands up, they are gesturing to buy.
When you touch the forehead, digits equal multiples of ten so below I’m indicating that I intend to sell 40 shares!
The use of hand signals on the trading floor began around the middle of the 19th century. Brokers and traders were trying to get in the best position to see the trading boards and access the brokerage service windows, from which information could be retrieved, interpreted, and acted upon. As you can imagine, it got quite heated at times!
Brokers needed to be able to pass information quickly and directly to a trader on the floor without revealing it to anyone else and this is where arbitrage came in.
Communicating using hand signals is actually very efficient, practical and mainains confidentiality.
These days, open out-cry environments have pretty much all been replaced by electronic methods of trading and whilst I simulated arb for a laugh, all my trading is done either on-line or over the telephone.
I purchased DS Smith stock some time ago and they have continued to do well since.
Recognising the stock was performing well, I set a sell limit instruction online via the Hargreaves Lansdown App.
It took just over a month for the upper limit I set of £4.40 to be reached.
I purchased at around £3.19 per share so multiplied by 40 that equals £128. I sold 40 shares at £4.40 which equals £176. The difference between the two is £48. Once I had taken the brokerage fee into consideration, coincidentally, this left a margin of almost £40 on the sale of 40 shares!
As I purchased more than 40 shares in my previous transaction, selling the 40 felt more like cashing in some of the profit by liquifying some of that stock.
I hereby pledge to give that profit away via a subsequent #40s440 donation 🙂
https://en.m.wikipedia.org/wiki/Open_outcry
