[AnthonyMouse]

Suppose the price of Amazon stock is going to be 20% higher tomorrow than it is today. If everyone knew this, the price would already be 20% higher, because the existing owners wouldn't sell at the lower price. If some people know this but not everyone, they'll keep buying Amazon stock until the price increases by 20%, which again causes the price to immediately increase by 20% instead of waiting until tomorrow.

The arbitrage opportunity is available to anyone who knows the information, at the expense of anyone trading the stock who doesn't. If everybody knows then there is no arbitrage opportunity because the gap is already closed.

[oceanplexian]

Arbitrage exists because of inefficiencies in price discovery, and reducing that to “someone has information but another person doesn't” trivializes what traders do and demonstrates narrow thinking about how markets, and how business works in general.

Information isn’t the sole reason someone might be able to make money in a market, most times it’s the least important factor. Finance, like any other business relies on execution, not knowledge.

For example, you have some information, but it’s worthless because you’re reading into it the wrong way. Or the information is material, but the market doesn’t believe it. Or macro conditions negate the information. Or you don’t have the ability to transact on the information. Or you’re too risk averse to act on the information. Or the classic “you’re right, but it’s the wrong time”, like many companies were in the dot-com era.

[AnthonyMouse]

> For example, you have some information, but it’s worthless because you’re reading into it the wrong way. Or the information is material, but the market doesn’t believe it. Or macro conditions negate the information. ... Or the classic “you’re right, but it’s the wrong time”, like many companies were in the dot-com era.

These are all part of knowing what's going to happen. If you think you know something but you're wrong, you're wrong, and the person who does know (or makes a better guess) is the person who takes your money.

> Or you’re too risk averse to act on the information.

At which point you might as well tell other people or publish it and then someone else can.

> Or you don’t have the ability to transact on the information.

This is extremely unusual for publicly traded stocks. Random individuals off the street can open a brokerage account if they think they know something the market doesn't. Even people with no money could sell the information to someone else for whatever they could get, or just tell their friends to have someone richer than them owe them a favor, and then that person trades on it.

Probably the most common case you can't use it is when it would be insider trading. But why would acting on some LLM output be insider trading?

[andoando]

Its crazy how many people don't understand this. I can't believe how many people think they could predict the market with candle light sticks or whatever. If a method for predicting the market is so readily available that someone is selling it to you, it eouldnt work!!