How do you practically trade box spreads?

Thanks for confirming @newwurldmn. The comments in this thread so far have been really helpful. To you and @MrMuppet My intention is to put on the box spread to lend. That’s a 4 percent carry near risk free. I am already using 1 year bonds as collateral. Isn’t that near 8 percent carry almost risk free? And I still have margin left over to put on other positions since the box is nearly risk free.

 

Of course, I have to assume the risk of bad marks, deal with execution, and pay the commissions on a 4 legged spread.

 

Cheaper from an execution perspective?

 

Beware of the "early assignment risk" with box spreads (as well with any other shortselling of American Style options):
"Box spreads expose investors to low-probability, extremely-high severity risk: if the options are exercised early, they can incur a loss much greater than the expected gain."

 

How is that 8percent?

 

Did not put position on yet. About 4 percent on bonds. Assuming I can get 4 percent from box.

 

Just wanted to follow up on this thread. Going long the box is basically like buying a fixed income product with more headaches. It can be done on cash balances without problems but it becomes almost pointless to do it on margin as the rate you receive is almost always lower than the rate to borrow.

I suppose if funding rate was lower than lending rate, that would be an arb. Just buy short duration treasuries.

 

Bob I have a question about trading at Lightspeed. Off topic but is it possible to find a portfolio margin account with one year treasuries as collateral? Thanks.

 

You can use T-bills/notes or we offer VUSXX, but the VUSXX is not swept. You have to request to buy or sell it. T-bills are margined at 90% while VUSXX is at 99%. https://investor.vanguard.com/investment-products/mutual-funds/profile/vusxx. You can request these in any Securities account type. In Futures, just T-bills or notes only.

Lightspeed Financial Services Group LLC. is not affiliated with this service providers. Data, information, and material (“content”) is provided for informational purposes only. This content neither is, nor should be construed as an offer, solicitation, or recommendation to buy or sell any securities. Any investment decisions made by the user through the use of such content is solely based on the user’s independent analysis taking into consideration your financial circumstances, investment objectives, and risk tolerance. Lightspeed Financial Services Group LLC does not endorse, offer nor recommend any of the services provided and any service used to execute any trading strategies are solely based on the independent analysis of the user.

 

There was a typo… I meant fund an account with t bills. I think you got what I meant.