When to use
Occasionally, a market will get out of line enough to justify an initial entry into one of these positions. However, they are most commonly used to "lock" all or part of a portfolio by buying or selling to create the missing "legs" of the position. These are alternatives to closing out positions at possibly unfavorable prices.

Long Box
Long a bull spread, long a bear spread - that is, long call A, Short call B, long put B, short put A. Value = B - A.

Short Box
Long call B, short call A, long put A, short put B. value = A - B.

Long-instrument conversion
Long instrument, long put A, short call A. Value = 0. "Price" = instrument + put - A - call.

Short-instrument conversion
Short instrument, long call A, short put A. Value = 0. "Price" = A + call - instrument - put.

BACK