Box Spread

A box spread is the ultimate four-leg arbitrage strategy that creates a risk-free investment yielding the difference between strike prices, making it essential for professional traders seeking guaranteed returns and efficient capital deployment. This sophisticated strategy combines a bull call spread with a bear put spread using the same strike prices, creating a position that locks in a fixed return equal to the strike difference minus the net premium paid, regardless of the underlying asset's price movement. The strategy is particularly valuable when the implied interest rate embedded in the options prices differs from prevailing market rates, creating opportunities for risk-free arbitrage profits. Professional traders and institutions use box spreads for capital preservation, liquidity management, and as alternatives to traditional fixed-income investments when options markets offer superior risk-adjusted returns. The strategy requires deep understanding of interest rate arbitrage, dividend timing effects, and early assignment risks to ensure optimal execution and profit realization. Box spreads are often used by market makers and arbitrageurs to lock in profits from other trading activities while maintaining market-neutral exposure. The strategy provides guaranteed returns with minimal market risk when properly executed

If NIFTY is at ₹25,800, set up: Buy ₹25,600 Call for ₹280, Sell ₹26,000 Call for ₹120, Buy ₹26,000 Put for ₹270, Sell ₹25,600 Put for ₹130, creating ₹200 net debit with guaranteed ₹400 return at expiration, yielding 100% profit regardless of NIFTY's final price.