Explain the Term ‘Negative Box’ and Its Implication

A 'negative box' refers to a box spread executed at a net debit (cost) that is greater than the maximum theoretical profit. Since the maximum profit of a box spread is the difference between the strike prices, paying more than this difference means the position is guaranteed to lose money at expiration.

A negative box is a result of extremely poor execution or a mispricing that is too costly to arbitrage profitably. It is an immediate, guaranteed loss.