Investment Type: Debit
Strike Prices :OTM for Put sold leg + ITM for Call bought leg + ITM for Put bought leg + OTM for Call sold leg
Expiration Month: Same expiration months for all legs and should be current month.
Composition: (Sell OTM Put + Buy same strike ITM Call) + (Buy ITM Put + Sell same strike OTM Call)

 
  Long Box Profile Chart  
 

 
Description:

 

Long Box is a complex strategy. It’s the combination of lower strike Long Synthetic Future and higher strike Short Synthetic Future which cancel each other out, creating a straight horizontal line for the risk profile.

 

This strategy is meant for advanced traders and best used on stocks with high volatility. On top of that, we can apply many different strategies as time goes.

 
  Example  
 

 

Entry:


Maximum Initial Investment = $5,000 (or based on 5% money management rule)

 

Stock Price :
$34.00
   
Buy/Sell :
Sell
    
Strike Price :
32.5 Put
 } Premium: $0.60
Expiration Date :
December
No of Contracts :
20
    

 

Stock Price :
$34.00
   
Buy/Sell :
Buy
    
Strike Price :
32.5 Call
} Premium: $2.15
Expiration Date :
December
No of Contracts :
20
    

 

Stock Price :
$34.00
   
Buy/Sell :
Buy
    
Strike Price :
35 Put
 } Premium: $1.70
Expiration Date :
December
No of Contracts :
20
    

 

Stock Price :
$34.00
   
Buy/Sell :
Sell
    
Strike Price :
35 Call
} Premium: $0.80
Expiration Date :
December
No of Contracts :
20
    

 

Investment @ Entry = (Premium of lower strike Put Leg x No of Contracts x 100 Shares) + (Premium of lower strike Call Leg x No of Contracts x 100 Shares) + (Premium of higher strike Put Leg x No of Contracts x 100 Shares) + (Premium of higher strike Call Leg x No of Contracts x 100 Shares) = ($1,200) + $4,300 + $3,400 + ($1,600) = $4,900

 

Exit:

 

Best Case Scenario:

 

Profit @ Exit = Variable

 

Return of Investment = Variable

 

Worst Case Scenario : Investment @ Entry

Stock Price
Profit/Loss
ROI

30.00

5

2%

32.50

5

2%

35.00

5

2%

37.50

5

2%

40.00

5

2%