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.

BREAKING DOWN '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 do I set a strike price in an options spread?

    Find out more about option spread strategies, and how to set the strike prices for bull call spreads and bull put spreads ... Read Answer >>
  2. An investor has bought 25 call options on oil. The exercise price of the call is ...

    The correct answer is: a) Rule for a long call position: If at expiry, the asset price settles below the expiry price, Do ... Read Answer >>
  3. What's the difference between a credit spread and a debt spread?

    Learn about debit and credit option spread strategies, how these strategies are used, and the differences between debit spreads ... Read Answer >>
  4. Is there a difference between financial spread betting and arbitrage? (AAPL, NFLX)

    Find out more about financial spread betting, arbitrage and the differences between financial spread betting and the arbitrage ... Read Answer >>
  5. Why do option volume quotes differ on different websites?

    Option quotes are different in price and in volume because identical options can trade on more than one market or exchange. ... Read Answer >>
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    Learn about one of the most common risk-management strategies options traders use, called spread hedging, to limit exposure ... Read Answer >>
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