Option trading strategies – Understanding the back and box spread

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Back spread (also called reverse spread) entails long and short positions with different number of contracts.

Back Put Spread (also reverse ratio put spread ) reversal of the ratio put spreads. Long positions are greater than the short positions.

Combined price – spread positions of different classes

Combined price – spread positions of different classes is a portfolio of bought (long) and selling (short) options. It involves combinations of call and put options, which can consist of different series, ie they differ in strike price or maturity.

Box spread

The box spread is an options position that is based on arbitrage opportunities due to disparities in the valuation of call and put options .

Long Box : Long box denotes the purchase of the box spreads. This consists of a bull spread with calls (also bull call spread) and a bear spread with puts (also bear put spread).

That is, the investor who wants to achieve arbitrage profits, acquires a number of calls with low strike price and sells the same number of calls with a higher strike price.

At the same time he acquires an equal number of puts with a higher strike price and sells the same number of puts at a lower strike price.

Short Box: Short Box refers to the sale of the box spreads. This consists of a bear spread with calls (also bear call spread) and a bull spread with puts (also bull put spread).

That is, the investor who wants to achieve arbitrage profits, acquires a number of calls with a higher strike price and sells the same number of calls with a lower strike price.

At the same time he acquires an equal number of puts with a low base price and sold the same number of puts at a higher strike price.

The possible arbitrage profit to be obtained from a possible inequality of the valuation of options and thus the option prices are the transaction costs and a possible carrying batch, ie the cost of financing compared to a net debit position.

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