A Box Spread is an advanced options arbitrage strategy that combines a bull call spread and a bear put spread on the same underlying asset with identical expiry dates, creating a risk-free payoff equal to the difference in strike prices. The strategy profits when the combined premium paid for the box is less than the guaranteed payoff at expiry. Box spreads are primarily used by institutional traders to exploit mispricing in options markets. Retail traders should note that transaction costs and taxes can significantly erode the theoretical arbitrage profit.
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