> For the complete documentation index, see [llms.txt](https://docs.watt.si/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.watt.si/the-protocol/volatility-farming/arbitrage-opportunities.md). # Arbitrage opportunities Volatility farming works ideally in environments characterized by **rapidly changing asset prices**, a scenario common in crypto markets. The supply side of volatility farming consists primarily of arbitrageurs and traders who actively pursue opportunities arising from price discrepancies between similar assets. The Watt protocol satisfies **all fundamental conditions** essential for successful arbitrage: * Watt tokens are freely tradable without requiring permission or encountering any constraints. * Watt tokens can always be redeemed back into their original underlying tokens. * Integration with permissionless decentralized exchanges (DEXs) makes opportunities accessible to everyone. ### Examples of arbitrage trades in Watt protocol * **Scenario 1:** Suppose the wattBONK token trades at a lower price than the original BONK token. Arbitrageurs can capitalize on this price difference by buying wattBONK on a DEX and then unwrapping it into the native BONK token. The native BONK can subsequently be sold, completing the arbitrage. This opportunity persists until the price difference between wattBONK and BONK equals the sum of the transfer and unwrap fees associated with wattBONK. * **Scenario 2:** Conversely, if wattBONK trades at a higher price than the original BONK token, traders can take advantage of this situation by purchasing BONK tokens and wrapping them into wattBONK. The resulting liquid-staked wattBONK can then be sold on a DEX to complete the arbitrage. This arbitrage opportunity remains viable until the price difference between wattBONK and BONK matches the total wrap and transfer fees for wattBONK. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.watt.si/the-protocol/volatility-farming/arbitrage-opportunities.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.