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Box Spread

Neutral/Arbitrage Strategy

Use Zuviz's free options visualizer to build this strategy instantly. A synthetic loan or arbitrage strategy combining a bull call spread and bear put spread at the same strikes. Locks in a fixed payoff regardless of price movement.

⚡ Key Takeaways

  • Market Outlook: Market-neutral arbitrage
  • Max Profit: Difference between strikes - net debit (risk-free rate)
  • Max Loss: Minimal (only if position is mispriced)
  • Breakeven: Theoretical (arbitrage play)
  • Best for: Advanced traders exploiting pricing inefficiencies
  • Greeks Impact: All near zero (market-neutral by design)

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Market Outlook
Neutral
Max Profit
Fixed (Arbitrage)
Max Loss
Fixed (Spread Width - Cost)
Breakeven
N/A (Guaranteed)

📊 Payoff Diagram

Open in Zuviz →

🏗️ Strategy Structure

A Box Spread consists of 4 legs: a bull call spread + bear put spread at the same strikes.

Leg Action Type Strike Premium
1 Buy Call $100 (Lower) $8.00
2 Sell Call $110 (Higher) $3.00
3 Buy Put $110 (Higher) $5.00
4 Sell Put $100 (Lower) $2.00

Net Cost: ($8 - $3) + ($5 - $2) = $8.00 per share

Guaranteed Value at Expiration: $110 - $100 = $10.00 per share

Profit: $10 - $8 = $2.00 per share ($200 per contract)

🧮 Key Calculations

🎯 When to Use This Strategy

  • Arbitrage opportunity: When options are mispriced relative to interest rates
  • Synthetic loan: Borrow/lend at options-implied interest rates
  • Tax strategies: Defer gains or losses (consult tax advisor)
  • Market neutral: No directional exposure needed

📈 Greeks Impact

Delta (Δ)

Near Zero - You want the stock to stay still.

Theta (Θ)

Positive - Time decay is your best friend here.

Vega (ν)

Negative - You want volatility to decrease (IV Crush).

⚖️ Pros & Cons

Pros

  • Risk-free if priced correctly
  • No market direction risk
  • Guaranteed payoff at expiration
  • Can lock in attractive rates

Cons

  • Rarely profitable after commissions
  • Ties up capital until expiration
  • Early assignment risk (American options)
  • Complex execution (4 legs)

📝 Real-World Example

Trade: Bull Call Spread + Bear Put Spread at same strikes.

Goal: Capture risk-free rate differences.

🔗 Related Strategies

🦅 Iron Condor

Uses similar 4-leg structure

🦋 Long Butterfly

Another complex multi-leg strategy

Visualize This Strategy

See the payoff diagram in Zuviz.

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