Is there any reason why anyone wouldn't lend at 4 percent using the box market? European exercise on SPX seems to make it a nearly risk free position.
A retailer would have to do 25 or a 100 spx lots to access the floor it seems (could be wrong). Even with 1 M portfolio, that's huge size.
It is a simple question with a complicated answer. Am I a market maker or a retail customer? What does my book look like if a MM? What does my clearing firm charge me to borrow funds. What do they give me on credit balances? How much margin does it require? What are my transaction costs? Do I have short option contracts to offset the debit balance. How long am I locking in 4% if I buy or sell it? I would only, as a MM, buy a .SPX box if the cost lines up as free money. There are more reasons to short the .SPX box.
High State taxes could bias the decision. There are also some corporate tax laws that could/would bias it.
If their cost of financing is higher than 4percent if they can earn more than 4percent on that capital.
I think I need to use a proper margin calculator. I assumed since the position was nearly risk free, margin would be almost 0 using TIMS/ Portfolio margin.
A box spread is something you trade into, not a position you initiate. When you are sitting on an ITM vertical, it's usually better to box it instead of closing the position