What Is a “Box Spread” Arbitrage Strategy in Options?

A box spread is a four-legged, zero-risk options strategy that involves a combination of a bull call spread and a bear put spread, both with the same two strike prices and expiration. Theoretically, the net cost of the four options should equal the difference between the two strike prices, discounted to present value.

Any deviation from this theoretical value presents a risk-free arbitrage opportunity.