A box spread is a type of options strategy that combines a bull call spread with a bear put

spread. This strategy is designed to capitalize on significant price movements in either direction.
Here's a hypothetical example of a payoff for a box spread:

Let's assume the following hypothetical option prices:

- Stock XYZ is currently trading at $100.

- Call options for XYZ with a strike price of $105 are priced at $3 each.
- Call options for XYZ with a strike price of $110 are priced at $1 each.
- Put options for XYZ with a strike price of $95 are priced at $2 each.
- Put options for XYZ with a strike price of $90 are priced at $4 each.

Using these prices, we construct the following box spread:

- Buy 1 call option at $105 for $3.

- Sell 1 call option at $110 for $1.
- Buy 1 put option at $95 for $2.
- Sell 1 put option at $90 for $4.

The net initial cash flow for this strategy would be $0 ($3 - $1 + $2 - $4 = $0).

The potential outcomes of the box spread at expiration are as follows:

1. If the price of XYZ is below $90 at expiration, the profit would be ($90 - $95) - ($105 - $100) =
$5 - $5 = $0.

2. If the price of XYZ is between $90 and $95 at expiration, the profit would be ($S - $95) -
($105 - $100) = $S - $200.

3. If the price of XYZ is between $95 and $105 at expiration, the profit would be $0.

4. If the price of XYZ is between $105 and $110 at expiration, the profit would be ($105 - $S) -
($105 - $100) = $200 - $S.

5. If the price of XYZ is above $110 at expiration, the profit would be ($105 - $100) - ($110 - $S)
= $5 - $S.

This payoff structure shows that the maximum profit is achieved when the price of XYZ is
between $95 and $105 at expiration.