Short Box
Description
Selling a bull call spread and a bear put spread on the same two strikes, collecting a fixed amount up front against a fixed obligation at expiry -- effectively borrowing money at an implied rate.
Setup
- Sell a call at the lower strike, buy a call at the higher strike.
- Sell a put at the higher strike, buy a put at the lower strike, same expiry.
Context
The mirror image of a long box, used to lock in a favorable implied borrowing rate when the box can be sold for more than the fixed amount owed at expiry.
Risk Profile
The obligation at expiry is fixed and equal to the width between the two strikes, regardless of the underlying's price. The only real risk is receiving less for the box than that fixed obligation, or counterparty/execution risk on the four legs.
Pros
- Obligation at expiry does not depend on the underlying's price.
- Useful for locking in a favorable implied borrowing rate when priced favorably.
- Fully defined outcome from the moment the trade is placed.
Cons
- Small edge relative to the capital and four legs of commissions required.
- Any mispricing edge tends to be arbitraged away quickly in liquid markets.
Effect of Time
Time decay across the four legs largely cancels out, since the position is a fixed-payoff structure rather than a directional or volatility bet.
Effect of Volatility
A change in implied volatility has essentially no net effect, since the calls and puts move in offsetting ways.
Look-Alike Strategies
Live Structure
| Position | Right | Ratio | Strike | Expiry | Premium | Fill Price | Est. Fee |
|---|---|---|---|---|---|---|---|
| Short | Call | 1 | $84000.0000 | 24 Sep 2026 | $485.0610 | $421.7921 | $25.3075 |
| Long | Call | 1 | $85000.0000 | 24 Sep 2026 | $67.4851 | $75.9207 | $8.4356 |
| Short | Put | 1 | $85000.0000 | 24 Sep 2026 | $695.9397 | $548.3161 | $25.3069 |
| Long | Put | 1 | $84000.0000 | 24 Sep 2026 | $113.8810 | $126.5345 | $14.2351 |
Estimated Cost to Assemble
An estimate of what entering this structure right now would really cost: filling every leg by crossing the spread (the ask when buying, the bid when selling) instead of at the mid-price, plus an estimated exchange fee. Real fees and fills can differ from this estimate.
Payoff & Greeks vs. Underlying Price
The Greeks curves are a Black-Scholes model using each leg's current implied volatility, holding time to expiry fixed -- not live exchange data at every price, which only exists at the current price (dashed line).
Payoff at Expiration
This structure's value and profit/loss at expiration, at a handful of specific prices: every leg's strike, every breakeven, the current spot, and the chart's own range.
| Underlying Price | Value at Expiration | Profit / Loss | Return on Cost |
|---|---|---|---|
| $83000.0000 | -$1000.0000 | -$0.3654 | -0.0% |
| $84000.0000 | -$1000.0000 | -$0.3654 | -0.0% |
| $84356.3300 current | -$1000.0000 | -$0.3654 | -0.0% |
| $85000.0000 | -$1000.0000 | -$0.3654 | -0.0% |
| $86000.0000 | -$1000.0000 | -$0.3654 | -0.0% |