For example spx box spread I understand with American style early assignment but what about SPX ? is there any risk ? When should we create/trade it? I know when we need money at comparatively less interest than broker also can we withdraw this money once in the broker account for personal expenses ?
The money generated by a short box spread is not yours. You have to give it back at expiration, plus a little bit more, which is thought of as interest. But technically it is not a loan. Most retail traders will not be able to make effective use of the funds generated by a short box spread. You certainly can't withdraw it and use it to buy a house or a car, or to invest in the food truck business that your brother-in-law is running. The money needs to remain in your account to satisfy the margin requirements of the short legs of the box spread. Depending on the size of your account, and whether you have portfolio margin, and some other variables... You may be able to use some of it buy something else in your brokerage account, such as an index fund or some corporate bonds.
You said - money needs to remain in your account to satisfy margin requirement - can you pls give an example of 400 point wide short box spread - how much margin will be required ? I am asking because on schwab.com it only shows me buying power requirement - which is 9k - but it does not show margin requirement ...it will only show it under positions tab after order is executed - it is weird but that is how it is on web schwab.com
The margin requirement would be 400 points times the multiplier of 100, or $40,000.00. I use schwab.com every day. (I don't sell box spreads.) I've attached a screenshot of a potential order to sell a 400-point box spread. On these prices, you might collect a credit of, say, 398.00, or $39,800. Then at expiration when the position unwinds, you have to pay $40,000. So one way to look at it is that you are paying $200 to borrow the money from now until expiration (March 21). That works out to be an interest rate of around 10% per year. And that might be lower than the interest rate on a standard margin loan for a retail trader. Your original question was, can you withdraw the money and use it for something else. And I said no, you need it for the margin requirement. But if you have something else in your account, like, say, $100,000 worth of common stock, index funds, or corporate bonds... Then the equity in that stuff could probably support the margin requirement on the box spread, and you might be able to withdraw the money. There was another thread a few weeks ago about a close related concept, i.e., that marginable securities can be used to satisfy the margin requirements for credit spreads. So if I want to sell a simple credit spread, like short the 400 call and long the 405 call, the margin requirement is $500 minus the premium that I collect from selling the spread. I can do this spread with no cash available to trade in the account if I have stock, bonds, or other securities that have enough value to satisfy the $500 margin requirement.