Long box spread

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.

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

Check your understanding

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