Long Box Spread
Options strategy · Level 2 · Long options & hedges
Keep reading with Tradecraft
Without an account, you can read three definitions every 30 days. Tradecraft explains all 738 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
A long call spread plus a long put spread on the same two strikes. At expiry it is always worth exactly the strike width, so buying it is lending money: you pay less than the width today and get the width back.
Where Tradecraft teaches it
Level 2 · Long options & hedges, in the lesson “Box spreads: synthetic lending”: A box always pays its strike width — so its price is really an interest rate.
Related terms
- ConversionLong stock + long put + short call, same strike and expiry.
- ReversalShort stock + long call + short put, same strike.
- Implied financing rateThe interest rate embedded in a box spread’s price: the return from paying the price today and receiving the strike width at expiry.
- CollarOwn the stock, buy a put below and sell a call above.
- Covered PutThe mirror of a covered call: you are short 100 shares and sell a put below.
- Long CallPay a premium for the right to buy 100 shares at the strike.