Box Spread

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DEFINITION of 'Box Spread'

A dual option position involving a bull and bear spread with identical expiry dates. This investment strategy provides for minimal risk. Additionally, it can lead to an arbitrage position as an investor attempts to lock in a small return at expiry.

INVESTOPEDIA EXPLAINS 'Box Spread'

A box spread is a complicated strategy for the more advanced options trader. The purpose of this investment is to locate and exploit the discrepancies within the market prices of option contracts.

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RELATED FAQS
  1. How can I use an out-of-the-money put time spread for downside risk?

    Long Put Calendar Spread An out-of-the-money put time spread can hedge downside risk by selling an out-of-the-money put ... Read Full Answer >>
  2. Can an investor buy leveraged ETFs that track the automotive sector?

    As of 2015, no leveraged exchange-traded funds, or ETFs, track the automotive sector. However, a non-leveraged ETF tracks ... Read Full Answer >>
  3. What risks should I consider taking a short put position?

    The risks to consider before taking a short put position are the odds of sustained weakness in the asset price and a spike ... Read Full Answer >>
  4. What happens if a software glitch fails to execute the strike price I set?

    If you've ever suffered the frustrating experience of having an order not filled or had a strike price fail to execute because ... Read Full Answer >>
  5. Why should I consider buying an option if it's out-of-the-money?

    One situation when a trader may want to buy an out-of-the-money option is to hedge a stock position. A trader may want to ... Read Full Answer >>
  6. How do traders use out-of-the-money options to hedge?

    Traders can utilize out-of-the-money options to hedge an existing market position by either buying or selling options. A ... Read Full Answer >>
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