
Compare Bear Put Spread and Box Spread (Arbitrage) options trading strategies. Find similarities and differences between Bear Put Spread and Box Spread (Arbitrage) strategies. Find the best options trading strategy for your trading needs.
Bear Put Spread  Box Spread (Arbitrage)  

About Strategy  The Bear Put strategy involves selling a Put Option while simultaneously buying a Put option. Contrary to Bear Call Spread, here you pay the higher premium and receive the lower premium. So there is a net debit in premium. Your risk is capped at the difference in premiums while your profit will be limited to the difference in strike prices of Put Option minus net premiums. This strategy is used when the trader believes that the price of underlying asset will go down moderately. This strategy is also known as the bear put debit spread as a net debit is taken upon entering the trade. This strategy has a limited risk as well as limited rewards. How to use the bear put spread options strategy? The bear put spread strategy looks like... Read More  Box Spread (also known as Long Box) is an arbitrage strategy. It involves buying a Bull Call Spread (1 ITM and I OTM Call) together with the corresponding Bear Put Spread (1 ITM and 1 OTM Put), with both spreads having the same strike prices and expiration dates. The strategy is called Box Spread as it is combination of 2 spreads (4 trades) and the profit/loss calculated together as 1 trade. Note that the total cost of the box remain same irrespective to the price movement of underlying security in any direction. The expiration value of the box spread is actually the difference between the strike prices of the options involved. The Long Box strategy is opposite to Short Box strategy. It is used when the spreads are underpriced with respe... Read More 
Market View  Bearish  Neutral 
Strategy Level  Advance  Advance 
Options Type  Put  Call + Put 
Number of Positions  2  4 
Risk Profile  Limited  None 
Reward Profile  Limited  Limited 
Breakeven Point  Strike Price of Long Put  Net Premium 
Bear Put Spread  Box Spread (Arbitrage)  

When to use?  The bear call spread options strategy is used when you are bearish in market view. The strategy minimizes your risk in the event of prime movements going against your expectations. 
Being risks free arbitrage strategy, this strategy can earn better return than earnings in interest from fixed deposits. The earning from this strategy varies with the strike price chosen by the trader. i.e. Earning from strike price '10400, 10700' will be different from strike price combination of '9800,11000'. The long box strategy should be used when the component spreads are underpriced in relation to their expiration values. In most cases, the trader has to hold the position till expiry to gain the benefits of the price difference. Note: If the spreads are overprices, another strategy named Short Box can be used for a profit. This strategy should be used by advanced traders as the gains are minimal. The brokerage payable when implementing this strategy can take away all the profits. This strategy should only be implemented when the fees paid are lower than the expected profit. 
Market View  Bearish When you are expecting the price of the underlying to moderately drop. 
Neutral The market view for this strategy is neutral. The movement in underlying security doesn't affect the outcome (profit/loss). This arbitrage strategy is to earn small profits irrespective of the market movements in any direction. 
Action 

Say for XYZ stock, the component spreads are underpriced in relation to their expiration values. The trader could execute Long Box strategy by buying 1 ITM Call and 1 ITM Put while selling 1 OTM Call and 1 OTM Put. There is no risk of loss while the profit potential would be the difference between two strike prices minus net premium. 
Breakeven Point  Strike Price of Long Put  Net Premium The breakeven point is achieved when the price of the underlying is equal to strike price of long Put minus net premium. 
Bear Put Spread  Box Spread (Arbitrage)  

Risks  Limited The maximum loss is limited to net premium paid. It occurs when the price of the underlying is less than strike price of long Put.. Max Loss = Net Premium Paid. 
None The Box Spread Options Strategy is a relatively riskfree strategy. There is no risk in the overall position because the losses in one spread will be neutralized by the gains in the other spread. The trades are also riskfree as they are executed on an exchange and therefore cleared and guaranteed by the exchange. The small risks of this strategy include:

Rewards  Limited The maximum profit is achieved when the strike price of short Put is greater than the price of the underlying.. Max Profit = Strike Price of Long Put  Strike Price of Short Put  Net Premium Paid. 
Limited The reward in this strategy is the difference between the total cost of the box spread and its expiration value. Being an arbitrage strategy, the profits are very small. It's an extremely lowrisk options trading strategy. 
Maximum Profit Scenario  Underlying goes down and both options exercised 

Maximum Loss Scenario  Underlying goes up and both options not exercised 
Bear Put Spread  Box Spread (Arbitrage)  

Advantages  Risk is limited. It reduces the cost of investment. 

Disadvantage  The profit is limited. 

Simillar Strategies  Bear Call Spread, Bull Call Spread 
Rs 0 Eq Delivery Brokerage
Flat ₹10 Per Trade in F&O
Rs 0 Demat AMC