How It Works

SpreadWise turns a complex options strategy into a simple, tax-aware borrowing solution. By constructing a synthetic loan using listed index options, clients can access low-cost capital with a fixed repayment due at maturity — all without triggering capital gains or transferring assets.
What is a Box Spread?
A box spread is an options strategy that generates a fixed cash flow on a specific future date. It involves four options — two calls and two puts at two different strike prices — that completely neutralize market exposure.
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Think of it as building a synthetic bond:
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The position behaves like a zero-coupon loan
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Repayment is known from day one
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Fully hedged, no directional risk
This predictability makes the box spread a powerful tool for borrowing or lending capital.
An overview of box spreads from the official clearinghouse for listed options in the U.S.
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CME Group outlines how box spreads work in the context of index option trading.
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Sample Structure: S&P 500 Box Spread
Borrowing $185,000 today with a fixed repayment of $190,000 in 1 year.
Options Used:
Buy 6900 Call
Sell 5000 Call
Sell 6900 Put
Buy 5000 Put
Net Cash Received:
$185,000
Repay at Expiration:
$190,000
Cost of Borrowing:
$5,000 (effectively Interest)
How Box Spread Borrowing Works
When a box spread is sold, it delivers an upfront cash inflow — effectively functioning like a synthetic loan. At expiration, a fixed repayment is made, regardless of how the market performs. This structure creates a predictable borrowing experience without the complexity of traditional lending.
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Sell the spread → receive cash
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Withdraw funds while the position remains hedged
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Repay the preset amount at expiration or roll forward

How Box Spread Borrowing Works in Practice

You can borrow against your brokerage account by executing a short box spread and withdrawing the cash — all while keeping your portfolio intact.
Starting Point - Account Snapshot
Cash: $10,000
Equities: $800,000
Total Value: $810,000
Available Margin: ~$405,000
Step 1: Sell a Box Spread
Sell a short box spread to receive $185,000 in cash, with a known liability of $190,000 at expiration.
Step 2: Withdraw the Cash
You withdraw the full $185,000, reducing your available margin.
New Snapshot After Withdrawal
Cash: $10,000
Equity Holdings: $800,000
Box Spread Liability: -$190,000
Available Margin: $215,000
You’re borrowing from the options market, not a traditional lender. The position is fully hedged and margin requirements are automatically managed by your custodian.
Why It's so Cost-Efficent
Box spreads are constructed from highly liquid index options, such as those on the S&P 500. These trades are executed on public exchanges, where:
Institutional participants (market makers, hedge funds, ETFs) compete to fill your loan
Pricing is transparent and driven by supply and demand
Rates are typically lower than traditional margin loans or SBLOCs
This market-based structure ensures efficient pricing — not bank markups.
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Spreadwise LLC is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). The content provided here is for general informational purposes only and is not intended as tax, legal, or accounting advice. You should consult with a qualified tax advisor, attorney, or accountant before acting on any of the information presented.

Investing involves risk, including the potential loss of principal. Outcomes are not guaranteed unless specifically stated. Prior to implementing any investment strategy, we recommend speaking with a licensed financial professional and/or tax advisor to determine its suitability for your unique situation.

All interest rate and tax-related information is current as of 06/26/2025 and represents Spreadwise LLC’s best available market estimates. The rates provided are illustrative only and do not constitute an offer or guarantee of execution at those levels.

*Displayed interest rates are examples only and may change with market conditions. Spreadwise’s advisory fees are not included in quoted rates.

†Any projected interest rate or tax benefit calculations are hypothetical and meant solely for illustrative purposes.

You can review Spreadwise LLC’s registration and disclosures on the SEC’s website. For more detailed information, please see our Form CRS and Firm Brochure.

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