How Do Transaction Fees Compound the Risk Introduced by the Bid-Ask Spread?

Transaction fees are costs incurred for every trade, typically a percentage of the notional value or a fixed amount per contract. For a four-legged strategy like a box spread, fees are paid on all four transactions.

These fees are a direct cost that further reduces the theoretical profit, compounding the issue caused by a wide bid-ask spread. If the total cost of fees and the spread exceeds the expected profit, the trade becomes a guaranteed loss.