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Advanced Options · ADV-16a · Advanced

Long box spread

How does long box spread express a fixed terminal cash under matched settlement view?

One concept per page · original written lesson · 556 prose words · authored, not installed or production-approved

What you will learn and prerequisites

Read first: Read a contract and its premium, Rights, obligations and expiration, Defined payoff risk is not margin, Read the whole multi-leg ticket

A box combines a bull-call spread with a bear-put spread using identical strikes and expiry. One side supplies the part of the width the other does not. The resulting terminal identity is related to financing, not market direction.

Construction: read every leg

The call vertical costs 3.00 and the put vertical 1.90, for 490 total. Their common intrinsic payoff is always 500, making gross terminal P/L 10. The return compensates for time and implementation; it is not a free arbitrage declaration.

Read the ticket before the graph

BUY means you own an option right; SELL means you accept a short-option obligation. Positive quantities are long and negative quantities are short in the calculation. Check quantity, call/put, strike, multiplier and expiry before netting premium.

All legs in this example share November 20, 2026 expiration. The entry observation is October 6, 2026, with fictional QLT at 100. These are independent illustrative premiums, not a current option chain or executable quotes. The terminal diagram assumes every leg and any shares are resolved at one common settlement price.

Before expiry: time and volatility

Matched European cash-settled exposures offset spot and volatility in the ideal construction. Discounting and funding still matter. American equity-style examples can be disrupted by early assignment and mismatched share deliveries.

Manage the position deliberately

Calculate all entry and exit costs before discussing return. Four-leg costs can consume a small apparent advantage. Confirm exercise style, settlement, funding and tax treatment for any real use.

Fictional teaching ticket · no order submission

Long box spread

QLT • reference spot $100 • independent illustrative prices • quote date 2026-10-06

Read action, quantity, type, strike, expiry, premium and multiplier before the payoff
ActionQtyTypeStrikeExpiryPremium/unitMultiplier
BUY1Call1002026-11-206100
SELL1Call1052026-11-203100
BUY1Put1052026-11-204.9100
SELL1Put1002026-11-203100
Opening option cash (+received / −paid)-490 USD
Entry option fees in cost variant2.6 USD
Shares included0
Joint-terminal results—not a guarantee of interim cash requirements
MeasureBefore costsAfter stated entry fees
Maximum terminal profit107.4
Maximum terminal loss magnitude00
Breakeven settlement price(s)None / see zero intervalsNone / see zero intervals

This is a mathematical expiry experiment using the displayed legs, not an executable quote. The slider range is not a risk limit.

$0.65 per option contract on entry only. No exit, assignment, financing or tax costs modeled.

Independent fictional premiums, not one simultaneous arbitrage-consistent chain. All legs realized simultaneously at intrinsic at the same expiry; terminal calculations do not model American early exercise, temporary unhedged positions, forced liquidation or live liquidity. Displayed chart domain is not a tail-risk cap.

From opening cash to a settlement result

Read the opening instructions: buy 1 100 call at 6.00; sell 1 105 call at 3.00; buy 1 105 put at 4.90; sell 1 100 put at 3.00. Option opening cash is $490.00 paid as a debit. A received credit is not earned profit while the obligation remains open.

Set the common settlement price to 100.00. Calls have intrinsic value max(S−K,0); puts have max(K−S,0). Subtract the opening premium from each intrinsic value, then multiply by signed quantity and the 100-unit multiplier. Shares contribute their price change from their own cost. The calculation popup shows every leg.

The combined result is $10.00 before costs and $7.40 after illustrative opening fees of $2.60. Exit fees, slippage, funding, dividends and taxes are not included. Opening fees are 0.65 per option contract, not a statement of any broker's pricing.

Maximum terminal profit is $10.00; maximum terminal loss magnitude is $0.00, before costs. Isolated zero-P/L settlement points in the model: none. Move the scenario slider across each strike and explain why the slope changes there. A strike is a contract threshold, not a prediction.

This terminal model is useful for comparing risk shapes, but actual American-style assignment, share delivery, forced liquidation or a failed multi-leg exit can produce a different path. A long protective leg is not an automatic instruction that a broker must exercise it when another leg is assigned.

Open the calculation without leaving this lesson

Calculate this exact ticket

Same-page calculation. Closing restores the lesson position and originating control.

P/L = Σ[q × multiplier × (intrinsic − opening premium)] + shares × (S−share entry) − costs

Intrinsic is nonnegative before the signed quantity is applied. This is a fictional terminal calculation.

  1. +1 × 100 × (0.00 − 6.00) = $-600.00: 100 call.
  2. -1 × 100 × (0.00 − 3.00) = $300.00: 105 call.
  3. +1 × 100 × (5.00 − 4.90) = $10.00: 105 put.
  4. -1 × 100 × (0.00 − 3.00) = $300.00: 100 put.
  5. Opening fees: 2.60.
Before costs $10.00; after entry fees only $7.40.

Maximum risk and breakevens

Same-page calculation. Closing restores the lesson position and originating control.

Evaluate S=0, all strikes and the final tail slope; solve P/L=0 on each linear segment.

Same-expiry payoffs are piecewise linear. A finite chart range cannot prove a tail is bounded.

  1. Maximum terminal profit is $10.00; maximum terminal loss magnitude is $0.00, before costs.
  2. Breakeven points: none.
  3. Costs shift net P/L downward without moving the strikes.
Maximum terminal profit is $10.00; maximum terminal loss magnitude is $0.00, before costs.

The whole ticket at common expiry

Vertical: P/L per complete ticket (USD)
Horizontal: Underlying settlement price (USD)

The whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.7.1667.77968.39329.00689.620410.234859299106113120
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees
Solid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range.
See the individual legs behind the combined curveThe whole ticket at common expirySolid combined curve is before fees; the second includes only the stated entry fees. Individual-leg lines explain construction. This is terminal intrinsic P/L, not current option value. Price can move outside the displayed range. The complete numerical data are available below.-1,443.9-804.34-164.78474.781,114.341,753.9859299106113120
1. Combined terminal P/L before fees2. Combined terminal P/L after entry fees3. Leg 1: BUY 1 100 call4. Leg 2: SELL 1 105 call5. Leg 3: BUY 1 105 put6. Leg 4: SELL 1 100 put
Read the graph as a data table
Complete graph data; original fictional observations or model calculations
Underlying settlement price (USD)Combined terminal P/L before feesCombined terminal P/L after entry feesLeg 1: BUY 1 100 callLeg 2: SELL 1 105 callLeg 3: BUY 1 105 putLeg 4: SELL 1 100 put
85107.4-6003001,510-1,200
85.4375107.4-6003001,466.25-1,156.25
85.875107.4-6003001,422.5-1,112.5
86.3125107.4-6003001,378.75-1,068.75
86.75107.4-6003001,335-1,025
87.1875107.4-6003001,291.25-981.25
87.625107.4-6003001,247.5-937.5
88.0625107.4-6003001,203.75-893.75
88.5107.4-6003001,160-850
88.9375107.4-6003001,116.25-806.25
89.375107.4-6003001,072.5-762.5
89.8125107.4-6003001,028.75-718.75
90.25107.4-600300985-675
90.6875107.4-600300941.25-631.25
91.125107.4-600300897.5-587.5
91.5625107.4-600300853.75-543.75
92107.4-600300810-500
92.4375107.4-600300766.25-456.25
92.875107.4-600300722.5-412.5
93.3125107.4-600300678.75-368.75
93.75107.4-600300635-325
94.1875107.4-600300591.25-281.25
94.625107.4-600300547.5-237.5
95.0625107.4-600300503.75-193.75
95.5107.4-600300460-150
95.9375107.4-600300416.25-106.25
96.375107.4-600300372.5-62.5
96.8125107.4-600300328.75-18.75
97.25107.4-60030028525
97.6875107.4-600300241.2568.75
98.125107.4-600300197.5112.5
98.5625107.4-600300153.75156.25
99107.4-600300110200
99.4375107.4-60030066.25243.75
99.875107.4-60030022.5287.5
100107.4-60030010300
100.312107.4-568.75300-21.25300
100.75107.4-525300-65300
101.188107.4-481.25300-108.75300
101.625107.4-437.5300-152.5300
102.062107.4-393.75300-196.25300
102.5107.4-350300-240300
102.938107.4-306.25300-283.75300
103.375107.4-262.5300-327.5300
103.812107.4-218.75300-371.25300
104.25107.4-175300-415300
104.688107.4-131.25300-458.75300
105107.4-100300-490300
105.125107.4-87.5287.5-490300
105.562107.4-43.75243.75-490300
106107.40200-490300
106.438107.443.75156.25-490300
106.875107.487.5112.5-490300
107.312107.4131.2568.75-490300
107.75107.417525-490300
108.188107.4218.75-18.75-490300
108.625107.4262.5-62.5-490300
109.062107.4306.25-106.25-490300
109.5107.4350-150-490300
109.938107.4393.75-193.75-490300
110.375107.4437.5-237.5-490300
110.812107.4481.25-281.25-490300
111.25107.4525-325-490300
111.688107.4568.75-368.75-490300
112.125107.4612.5-412.5-490300
112.562107.4656.25-456.25-490300
113107.4700-500-490300
113.438107.4743.75-543.75-490300
113.875107.4787.5-587.5-490300
114.312107.4831.25-631.25-490300
114.75107.4875-675-490300
115.188107.4918.75-718.75-490300
115.625107.4962.5-762.5-490300
116.062107.41,006.25-806.25-490300
116.5107.41,050-850-490300
116.938107.41,093.75-893.75-490300
117.375107.41,137.5-937.5-490300
117.812107.41,181.25-981.25-490300
118.25107.41,225-1,025-490300
118.688107.41,268.75-1,068.75-490300
119.125107.41,312.5-1,112.5-490300
119.562107.41,356.25-1,156.25-490300
120107.41,400-1,200-490300

The failure case

A fixed terminal algebra does not ensure an American-style account can hold the position undisturbed. Early assignment or transaction costs can defeat the small financing edge.

Check your understanding

Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.

What is whole-position terminal P/L at QLT 100.00, before costs?

Reveal the worked answer

$10.00

Use all signed legs, not just the winning leg. The popup and graph use the same ticket.

Critical risk question

Does a terminal loss bound guarantee every early-assignment or liquidation outcome?

Reveal the worked answer

No.

It describes the specified common-settlement payoff. Product rules, stock delivery, capital and execution still matter.

Takeaway

Explain the intended fixed terminal cash under matched settlement exposure, each leg's obligation and the adverse price region before using the strategy name.

Sources, assumptions and downloadable script

External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.

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