FREE Account Opening + No Clearing Fees
Compare Strategies:

Long Call Butterfly Vs Short Box (Arbitrage) Options Trading Strategy Comparison

Compare Long Call Butterfly and Short Box (Arbitrage) options trading strategies. Find similarities and differences between Long Call Butterfly and Short Box (Arbitrage) strategies. Find the best options trading strategy for your trading needs.

Long Call Butterfly Vs Short Box (Arbitrage)

  Long Call Butterfly Short Box (Arbitrage)
Long Call Butterfly Logo Short Box (Arbitrage) Logo
About Strategy Long Call Butterfly is a neutral strategy where very low volatility in the price of underlying is expected. The strategy is a combination of bull Spread and bear Spread. It involves Buy 1 ITM Call, Sell 2 ATM Calls and Buy 1 OTM Call. The strike prices of all Options should be at equal distance from the current price. Suppose Nifty is currently trading at 10400. You expect very little volatility in it. You can implement the Long Call Butterfly by buying 1 ITM Call Option at 10300, selling 2 ATM Nifty Call Options at 10400, buying 1 OTM Call Option at 10500. Ensure that strike prices of Options are at equidistance. Your loss will be limited to the net premium paid on 4 positions while profit will be limited to strike price of short calls.... Read More Short Box is an arbitrage strategy. It involves selling a Bull Call Spread (1 ITM and I OTM Call) together with the corresponding Bear Put Spread (1 ITM and 1 OTM Put), with both spreads having the same strike prices and expiration dates. The short box strategy is opposite to Long Box (or Box Spread). It is used when the spreads are overpriced with respect to their combined expiration value. This strategy is the combination of 2 spreads (4 trades) and the profit/loss calculated together as 1 trade. Note that the 'total cost of the box remain same' irrespective to the price movement of underlying security in any direction. The expiration value of the box spread is actually the difference between the strike prices of the options involved. ... Read More
Market View Neutral Neutral
Strategy Level Advance Advance
Options Type Call Call + Put
Number of Positions 4 4
Risk Profile Limited None
Reward Profile Limited Limited
Breakeven Point

When and how to use Long Call Butterfly and Short Box (Arbitrage)?

  Long Call Butterfly Short Box (Arbitrage)
When to use?

This strategy should be used when you're expecting no volatility in the price of the underlying.

Being risks free arbitrage strategy, this strategy can earn better return than earnings in interest from fixed deposits for any investor. The earning from this strategy varies with the strike price chosen by the trader. i.e. Earning from strike price '10400, 10700' will be different from strike price combination of '9800,11000'.

The short box strategy should be used when the component spreads are overpriced 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 underpriced, another strategy named Long Box (or Box Spread) 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. This strategy should only be implemented when the fees paid are lower than the expected profit.

Market View Neutral

Neutral on the underlying asset and bearish on the volatility.


The market view for this strategy is neutral. The movement in underlying security doesn't affect the outcome (profit/loss). This arbitrage strategy is to earn small profits irrespective of the market movements in any direction.

  • Sell 2 ATM Call
  • Buy 1 ITM Call
  • Buy 1 OTM Call

  • Buy Call Option 2
  • Sell Call Option 1
  • Buy Put Option 2
  • Sell Put Option 1 (2>1)

Say for XYZ stock, the component spread is relatively overpriced than its underlying. You can execute execute Short Box strategy by selling 1 ITM Call and 1 ITM Put while buying 1 OTM Call and 1 OTM Put. There is no risk of loss while the profit potential would be the difference between two strike prices minus net premium.

Breakeven Point

Upper Breakeven = Higher Strike Price - Net Premium

Lower Breakeven = Lower Strike Price + Net Premium

Compare Risks and Rewards (Long Call Butterfly Vs Short Box (Arbitrage))

  Long Call Butterfly Short Box (Arbitrage)
Risks Limited

Risk in the Long Call Butterfly options strategy is limited to the net premium paid.


The Short Box Spread Options Strategy is a relatively risk-free strategy. There is no risk in the overall position because the losses in one spread will be neutralized by the gains in the other spread.

The trades are also risk-free as they are executed on an exchange and therefore cleared and guaranteed by the exchange.

The small risks of this strategy include:

  1. The cost of trading - Some brokers charges high brokerage/fees, which along with the taxes could make the overall loss-making trade.
  2. The box spread can be liquidated by an offsetting transaction easily and transparently on an exchange with minimal loss/profit.
Rewards Limited

Rewards in the Long Call Butterfly options strategy is limited to the adjacent strikes minus net premium debit.


The reward in this strategy is the difference between the total cost of the box spread and its expiration value. Being an arbitrage strategy, the profits are very small.

It's an extremely low-risk options trading strategy.

Maximum Profit Scenario

Only ITM Call exercised

Maximum Loss Scenario

All options exercised or all options not exercised.

Pros & Cons or Long Call Butterfly and Short Box (Arbitrage)

  Long Call Butterfly Short Box (Arbitrage)

Profit earning strategy with limited risk in a less volatile market.

  1. In short box, you are taking money in, so there's no capital tied up.
  2. This is an Arbitrage strategy. This strategy is to earn small profits with very little or zero risks.

Premiums and brokerage paid on multiple position may eat your profits.

  1. It's a professional strategy and not for retail investors. The opportunities are closely monitored by High-Frequency algorithms. These arbitrage opportunities are usually for the high-frequency algorithms and need large pools of money to make it worth it and usually with better brokerage commission schemes.
  2. This strategy has high margin maintenance requirements and in many cases, the trader won't have the margin available to do that.
  3. For retail investors, the brokerage commissions don't make this a viable strategy. Only low-fee traders can take advantage of this.
  4. In theory, this strategy sounds good but in reality, it may not as profits are small.
  5. Locking the box - Trader has to wait until to expiry by keeping the money stuck in the box.
Simillar Strategies


Add a public comment...