Strategy for trading options on forts


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    Arbitrage strategy is a way to earn small profits with very little or zero risk. In this a trader buys the call and put have the same strike value and expiration The resulting portfolio is delta neutral. As you see in the above table, this is a delta neutral strategy.

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    The strategy for trading options on forts is buying and selling equivalent spreads. As long as the price paid for the box is significantly below the combined expiration value of the spreads, a riskless profit can be earned.

    We will discuss this in detail in an example below.

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    As the profit from the box spread is very small, the brokerage and taxes involved in this strategy can sometimes offset all of the gains. It's very important to consider the trading cost brokerage, fee, taxes etc.

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    When to use Box Spread Arbitrage strategy? Being risks free arbitrage strategy, this strategy can earn better return than earnings in interest from fixed deposits.

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    The earning from this strategy varies with the strike price chosen by the trader. Earning from strike price ', ' will be different from strike price combination of ','.

    A commodity futures contract is an agreement between a buyer or end user, and a seller or producer to make or take delivery of a Commodity or Financial Futures contract of an Exchange traded contract of a specific size, grade and quality at an agreed upon price for a specific date in the future.

    The long box strategy should be used when the component spreads are underpriced in relation to their expiration values. In most cases, the trader has to hold the position till expiry to gain the benefits of the price difference.

    Note: If the spreads are overprices, another strategy named Short Box can be used for a profit. This strategy should be used by advanced traders as the gains are minimal. The brokerage payable when implementing this strategy can take away all the profits.

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    This strategy should only be implemented when the fees paid are lower than the expected profit.