Box spread
TradingDefinition
Four-leg options strategy that creates a synthetic loan or deposit. Combine a bull call spread + bear put spread at the same strikes. The package has a known terminal payoff — implies a specific interest rate.
Used by professional traders for arbitrage and as a tax-efficient way to borrow or lend at near-risk-free rates. Famous Robinhood "1R0NYMAN" 2019 box-spread blowup demonstrated how leveraged box spreads can implode if not perfectly matched.
Used by professional traders for arbitrage and as a tax-efficient way to borrow or lend at near-risk-free rates. Famous Robinhood "1R0NYMAN" 2019 box-spread blowup demonstrated how leveraged box spreads can implode if not perfectly matched.