Box Spread option strategy
Box Spread combines a bull call spread and a bear put spread on the same two strikes. At expiry it is always worth the difference between the strikes, so it locks in a fixed amount whatever the underlying does.
Payoff at expiry
Nifty, lot size 65 · Nifty future 22,650 · 6 Oct 2026Legs
| Action | Option | Strike | Lots | Qty | Premium |
|---|---|---|---|---|---|
| BUY | ATM Call | 22,650 | 1 | 65 | ₹135.48 |
| SELL | OTM Call | 22,750 | 1 | 65 | ₹91.62 |
| BUY | ITM Put | 22,750 | 1 | 65 | ₹191.82 |
| SELL | ATM Put | 22,650 | 1 | 65 | ₹135.68 |
How it works
- Buy 1 ATM call at the 22,650 strike for ₹135.48, paying the premium.
- Sell 1 OTM call at the 22,750 strike for ₹91.62, collecting the premium.
- Buy 1 ITM put at the 22,750 strike for ₹191.82, paying the premium.
- Sell 1 ATM put at the 22,650 strike for ₹135.68, collecting the premium.
- Whatever Nifty does, the legs offset: the result at expiry is ₹0, fixed when you enter.
At any level the result is the same, about ₹0 at these prices: the legs cancel out, so all you lock in is the small gap between the prices you trade at.
Set-up: Buy 1 lot ATM Call and Sell 1 lot higher strike Call; Buy 1 lot higher strike Put and Sell 1 lot ATM Put with same expiration date.
How the Greeks affect it
When to use
When the combined cost of the four options is below the strike difference (or the credit is above it), after brokerage and taxes.
- Payoff does not depend on the market direction.
- Shows how options are priced relative to each other.
- European index options remove early exercise risk.
Things to watch
- The edge is usually tiny and can vanish after costs.
- Four legs must be filled at the right prices together.
- Capital or margin is locked till expiry.
Box Spread: questions
What is a Box Spread strategy?
Box Spread combines a bull call spread and a bear put spread on the same two strikes. At expiry it is always worth the difference between the strikes, so it locks in a fixed amount whatever the underlying does.
When should you use a Box Spread?
When the combined cost of the four options is below the strike difference (or the credit is above it), after brokerage and taxes.
How do you set up a Box Spread?
Buy 1 lot ATM Call and Sell 1 lot higher strike Call; Buy 1 lot higher strike Put and Sell 1 lot ATM Put with same expiration date.
What is the maximum profit of a Box Spread?
Fixed: the strike difference less the net debit paid, regardless of where the underlying closes.
What is the maximum loss of a Box Spread?
Fixed and known upfront. The position loses only if it was entered above fair value or costs eat the edge.