Box Spread

A Box Spread is simply a combination of two vertical spreads. These spreads are used by professional Options traders who are trying to take advantage of a situation where the cost of the spreads (both verticals) is less than what the verticals would be worth when they expire.

They consider this to be a type of "synthetic loan" and the point of it is to create a risk-less payoff.

The typical Box spread is constructed like this:

  • Buy the AAPL 139 Call
  • Sell the AAPL 141 Call
  • Buy the AAPL 141 Put 
  • Sell the AAPL 139 Put