Box Trade on SPY. Where is the Risk?
- Thread starter misterkel
- Start date
did you trade this?
1. it expires next week, so you won't earn all the money tomorrow.
2. there's a div which if you don't exercise in the next 15 minutes will cost you 60 cents. If you do exercise, you will be short a naked put.
1. it expires next week, so you won't earn all the money tomorrow.
2. there's a div which if you don't exercise in the next 15 minutes will cost you 60 cents. If you do exercise, you will be short a naked put.
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100% gets jammed for for div.. full assignment.
Obviously, I thought of that, but this is a week out, so there is still a lot of premium in the short calls. Wouldn't make sense for counterparty to exercise for div, but to sell the calls and buy SPY on open market.
short calls are ATM, btw.
I should have looked at the trade more closely. Your trade as shown is LONG the box, not short it. And if you're actually going to sell it, the 438 call (next week) was an exercise. The dividend is not yet published as I type this but estimated to be $1.68, so your short 438 call was definitely an exercise (put was $1.03). So you're probably out $0.80 or more as the put will not be $1.03 at the opening today.
No free lunch. At least you learned something perhaps.
Box spreads have been discussed many times in this forum.
There box spreads in american options: This can get very dangerous.
Then there are box spreads in european options: That is a way to borrow or lend money.
https://www.elitetrader.com/et/threads/how-do-you-practically-trade-box-spreads.370407/
There box spreads in american options: This can get very dangerous.
Then there are box spreads in european options: That is a way to borrow or lend money.
https://www.elitetrader.com/et/threads/how-do-you-practically-trade-box-spreads.370407/