What Is a Box Spread and Why Is It Considered a Low-Risk Strategy?

A box spread is a four-legged options strategy combining a long call and short put at one strike, and a short call and long put at a higher strike, all with the same expiration. Theoretically, the payoff at expiration is fixed and equal to the difference between the strike prices.

It is low-risk because it aims to lock in a profit based on a known relationship, essentially replicating a zero-coupon bond. However, it still carries counterparty and execution risk.