I succeeded in getting CHF Funding through SMI Box in my real account. Like Euro, this CHF box also gives interest.Fxmove88 wrote: ↑Mon Oct 25, 2021 5:58 pm I have tried shorting other currency boxes on my paper account: Euro (CAC40, DJSD, ETX50 Box), GBP (Z Box), SEK (OSMX530 Box). I have yet succeeded in shorting SMI Box to get the CHF since I want to buy some Swiss stocks.
Has anyone else tried other currency boxes? AUD? JPY? SGD?
Box Spreads as Loans - Interactive Brokers IBKR - 2021 [and later]
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I don't think there's anything wrong with this per se, but the juice gained from this is similar to other tactics like shifting accounts around, opening up accounts for the bank bonus, or credit card balance transfer arbitrage. Note that with a box spread in place, I would not recommend taking advantage of transfer bonuses just because of the risk of screwing it up in the ACAT process. I personally am using it for "lifecycle investing" in this current positive momentum cycle, cognizant of the risks involved.spiyer99 wrote: ↑Tue Oct 26, 2021 2:29 am Not sure if this has been covered before, but what do people think of this? https://www.greaterwrong.com/posts/8NSK ... tly-faster
The author talks about using a box spread in a CD. "After taxes and commissions, this increases annual returns on your entire portfolio by 0.2-0.5%, nearly risk-free." Is it really worth the risk though?
PS: long time lurker, first time poster.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Looks like 2-year CDs yield 0.45-0.55% APR. Without looking up the rates for Dec 2023 spreads, I don't think you would make any money with that strategy right now. If you want to do something like this, I would recommend chasing bank account bonuses. If you sell a spread for $20k, you could use the cash to collect a couple hundred dollars in bonuses every quarter.spiyer99 wrote: ↑Tue Oct 26, 2021 2:29 am Not sure if this has been covered before, but what do people think of this? https://www.greaterwrong.com/posts/8NSK ... tly-faster
The author talks about using a box spread in a CD. "After taxes and commissions, this increases annual returns on your entire portfolio by 0.2-0.5%, nearly risk-free." Is it really worth the risk though?
PS: long time lurker, first time poster.
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I was thinking about exactly this as well. With interest rates at/near 0, it seems like buying a box could be a good alternative to parking cash in a high yield checking account, and with the liquidity of boxes, does anybody use these as a viable alternative to a savings account or even CD with a higher rate but with interest rate risk if liquidated early?comeinvest wrote: ↑Thu Oct 21, 2021 2:00 am I would say a box spread is fungible, as arbitrage traders, banks, or hedge funds could borrow in the interbank market or from money market funds, and invest in boxes. Risk free cash is fungible with risk free cash. It must have to do with balance sheet restrictions. I found the rate is slightly higher than the current yield of the most conservative money market funds. Might be a good method to park cash if needed.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Thank you! I am thinking about adding a calculator to translate interest rates into spread legs. Do you think that'd be helpful?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Buying a box is definitely better than depositing money at a small bank to get high interest. OCC is your counter party and it will guarantee the return of your money. That’s why it is being used by the company that has $3,5billion in cash.adamhg wrote: ↑Tue Oct 26, 2021 2:25 pmI was thinking about exactly this as well. With interest rates at/near 0, it seems like buying a box could be a good alternative to parking cash in a high yield checking account, and with the liquidity of boxes, does anybody use these as a viable alternative to a savings account or even CD with a higher rate but with interest rate risk if liquidated early?comeinvest wrote: ↑Thu Oct 21, 2021 2:00 am I would say a box spread is fungible, as arbitrage traders, banks, or hedge funds could borrow in the interbank market or from money market funds, and invest in boxes. Risk free cash is fungible with risk free cash. It must have to do with balance sheet restrictions. I found the rate is slightly higher than the current yield of the most conservative money market funds. Might be a good method to park cash if needed.
Last edited by Fxmove88 on Tue Oct 26, 2021 10:38 pm, edited 1 time in total.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
It would be helpful if you could highlight which date has the lowest interest rate. Lately interest rate has been increasing.
For bigger amount, option fees are negligible perhaps it is better to fund short term rather than long term ?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Lots of "smaller" things to do. Other posters mentioned chasing bank/brokerage account bonuses. Also I must add that with T-Mobile money you can earn 4% on first $3000 and 1% on the rest of balance (no upper limit). One of the easier way to arbitrage. Also I-Bonds right now
What I have done is to pay off higher interest car loan/leases and may actually sell 1 car to take advantage of high used price. Down-payment for a small (relative to your taxable account that is) property?
What I have done is to pay off higher interest car loan/leases and may actually sell 1 car to take advantage of high used price. Down-payment for a small (relative to your taxable account that is) property?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Ouch! $250 for a $5,000 loan On a day rates are down 5% no less...
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Short term is generally going to be lower rates unless the yield curve is inverted. Box spread rates should follow institutional rates + small premium, so that wouldn't really change. I think its really up to you. You can go with a higher DTE to lock in lower rates today if you think they're going up in the future, or if you think they'll continue to fall or stay the same, then go with a shorter DTE to keep your options open.
Also need to consider that you probably won't be able to roll a box directly, so there will be some roll drag at your broker's margin's rates for the duration it takes your new box to be filled.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Is it worth paying the broker's margin for an unknown number of days, vs. forcing a fill on the day of expiration by lowering the limit?adamhg wrote: ↑Wed Oct 27, 2021 2:24 pmShort term is generally going to be lower rates unless the yield curve is inverted. Box spread rates should follow institutional rates + small premium, so that wouldn't really change. I think its really up to you. You can go with a higher DTE to lock in lower rates today if you think they're going up in the future, or if you think they'll continue to fall or stay the same, then go with a shorter DTE to keep your options open.
Also need to consider that you probably won't be able to roll a box directly, so there will be some roll drag at your broker's margin's rates for the duration it takes your new box to be filled.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Would you care to elaborate further on how to sell a box by breaking up the trades into call spreads and put spreads? At what price on each trade and its calculation so you can come up to the desired interest rate? thank you.Freebee34 wrote: ↑Tue Oct 05, 2021 10:08 pm Been doing short SPX box spreads for a year and a half and getting 0.5%-0.6% on amounts of $20K - $100K. overall a good experience. here are some tips that I have learned along the way:
- For faster execution (less than 2 hours) and better pricing I found that breaking up the trade into call spreads and put spreads is more effective. When submitting the entire box it would take DAYS for the trade to execute at a higher interest rate (0.75%+)
- usually the last term is the least liquid. the second last one is usually much better
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Shorting a box is the same as selling a call and a put spread with the same strike and expiry. For example the 2022 December 16 4700/4500 call spread is trading for 416.12 - 293.50 = 122.62 and the put spread is trading for 412.93- 349.50 = 63.43Fxmove88 wrote: ↑Thu Oct 28, 2021 8:28 pmWould you care to elaborate further on how to sell a box by breaking up the trades into call spreads and put spreads? At what price on each trade and its calculation so you can come up to the desired interest rate? thank you.Freebee34 wrote: ↑Tue Oct 05, 2021 10:08 pm Been doing short SPX box spreads for a year and a half and getting 0.5%-0.6% on amounts of $20K - $100K. overall a good experience. here are some tips that I have learned along the way:
- For faster execution (less than 2 hours) and better pricing I found that breaking up the trade into call spreads and put spreads is more effective. When submitting the entire box it would take DAYS for the trade to execute at a higher interest rate (0.75%+)
- usually the last term is the least liquid. the second last one is usually much better
I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
both orders should be "net credit", and the sum of both should add up to the spread minus interest, right?Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Yeah both are credits and your effective interest will be: (spread of the strikes - gross credit received )/ gross credit receivedbling wrote: ↑Sat Oct 30, 2021 2:49 pmboth orders should be "net credit", and the sum of both should add up to the spread minus interest, right?Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
thanks, i may give this a shot on my merrill account, where i don't have level 5 options yet. i'm too skittish to try this on my IBKR account due to "the algorithm".Freebee34 wrote: ↑Sat Oct 30, 2021 4:12 pmYeah both are credits and your effective interest will be: (spread of the strikes - gross credit received )/ gross credit receivedbling wrote: ↑Sat Oct 30, 2021 2:49 pmboth orders should be "net credit", and the sum of both should add up to the spread minus interest, right?Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Thank you Freebee34 for the insight. I just traded the way you said it on my paper account and it is indeed a very quick fill.Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm Shorting a box is the same as selling a call and a put spread with the same strike and expiry. For example the 2022 December 16 4700/4500 call spread is trading for 416.12 - 293.50 = 122.62 and the put spread is trading for 412.93- 349.50 = 63.43
I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
SPX Bear Spread
SPX Dec 15 '22 4700/4500 Bear Put
Sold 1 limit 80.00 Day
and
SPX Bull Spread
SPX Dec 15 '22 4500/4700 Bull Call
Sold 1 limit 127.40 Day
was this a negative interest borrowing? ie. I am being rewarded with interest for borrowing.
My only concerns is what if the Second Spread Combo is failed to be executed? Would I be left with only one Combo executed?
Or both will always be executed, it's just a matter of price.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
If it's a paper account it's a hypothetical fill. Due to the thinly traded nature of boxes and long dated index option spreads you will need to risk real money in order to see if it will really fill, unfortunately.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
SPX added LEAPs to Dec17 '26 so 5+ year fixed rate loans are now a thing.
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- whodidntante
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Paper fills don't mean you can fill for real money.Fxmove88 wrote: ↑Mon Nov 01, 2021 8:55 amThank you Freebee34 for the insight. I just traded the way you said it on my paper account and it is indeed a very quick fill.Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm Shorting a box is the same as selling a call and a put spread with the same strike and expiry. For example the 2022 December 16 4700/4500 call spread is trading for 416.12 - 293.50 = 122.62 and the put spread is trading for 412.93- 349.50 = 63.43
I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
SPX Bear Spread
SPX Dec 15 '22 4700/4500 Bear Put
Sold 1 limit 80.00 Day
and
SPX Bull Spread
SPX Dec 15 '22 4500/4700 Bull Call
Sold 1 limit 127.40 Day
was this a negative interest borrowing? ie. I am being rewarded with interest for borrowing.
My only concerns is what if the Second Spread Combo is failed to be executed? Would I be left with only one Combo executed?
Or both will always be executed, it's just a matter of price.
The good news is that any reasonable fill right now is likely to produce a positive return after inflation. That is, the loan itself is profitable in real terms, and you get to realize a capital loss. Don't tell the IRS.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Got one filled for $300k for 12/14/2023 0.99%. Is it good?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Not only that, but your actual current cost could be estimated as negative the current carry of a 5 year treasury investment, which including the rolldown return is around 2% now. In other words, you would be paying the term premium that others earn. Terrible choice in my opinion.stay_the_course wrote: ↑Mon Nov 01, 2021 7:10 pmGiven that 5 year treasuries are around 1.20%, I guess box spreads expiring in ‘26 will have an implied interest of at least 1.50%.
Last edited by comeinvest on Tue Nov 02, 2021 7:11 pm, edited 1 time in total.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Congratulations!!! It looks like you made negative rates on the one lot. You can always get executed on the other side, it just depends on the price. Sometimes it is more favourable, sometimes less so.Fxmove88 wrote: ↑Mon Nov 01, 2021 8:55 amThank you Freebee34 for the insight. I just traded the way you said it on my paper account and it is indeed a very quick fill.Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm Shorting a box is the same as selling a call and a put spread with the same strike and expiry. For example the 2022 December 16 4700/4500 call spread is trading for 416.12 - 293.50 = 122.62 and the put spread is trading for 412.93- 349.50 = 63.43
I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
SPX Bear Spread
SPX Dec 15 '22 4700/4500 Bear Put
Sold 1 limit 80.00 Day
and
SPX Bull Spread
SPX Dec 15 '22 4500/4700 Bull Call
Sold 1 limit 127.40 Day
was this a negative interest borrowing? ie. I am being rewarded with interest for borrowing.
My only concerns is what if the Second Spread Combo is failed to be executed? Would I be left with only one Combo executed?
Or both will always be executed, it's just a matter of price.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
First off, this seems like a very interesting approach. But there are a few caveats:Freebee34 wrote: ↑Tue Nov 02, 2021 7:23 amCongratulations!!! It looks like you made negative rates on the one lot. You can always get executed on the other side, it just depends on the price. Sometimes it is more favourable, sometimes less so.Fxmove88 wrote: ↑Mon Nov 01, 2021 8:55 amThank you Freebee34 for the insight. I just traded the way you said it on my paper account and it is indeed a very quick fill.Freebee34 wrote: ↑Fri Oct 29, 2021 10:18 pm Shorting a box is the same as selling a call and a put spread with the same strike and expiry. For example the 2022 December 16 4700/4500 call spread is trading for 416.12 - 293.50 = 122.62 and the put spread is trading for 412.93- 349.50 = 63.43
I would put in as sell order for the put spread at 130 and for the call spread at 67 and wait a of couple hours to see which one get picked off first. Then I would slowly lower my offer on the other spread until I get filled or the mid. In practice what happens is you are providing a liquidity premium to whatever side the market is pushing (bearish or bullish) and then closing out the other side at a reasonable rate. It sounds strange but I have always gotten quick fills at good rates using this approach.
SPX Bear Spread
SPX Dec 15 '22 4700/4500 Bear Put
Sold 1 limit 80.00 Day
and
SPX Bull Spread
SPX Dec 15 '22 4500/4700 Bull Call
Sold 1 limit 127.40 Day
was this a negative interest borrowing? ie. I am being rewarded with interest for borrowing.
My only concerns is what if the Second Spread Combo is failed to be executed? Would I be left with only one Combo executed?
Or both will always be executed, it's just a matter of price.
- How does IB simulate fills of liquidity-providing orders? Can you get similar rates in a live account?
- Whenever you use non-marketable limit orders, your execution quality might be better in slow moving markets, but you might suffer comparatively large losses in more rare events of fast-moving markets, as your stale limit order will be picked up by swing traders who trade based on news flow or market movements. This effect is magnified when you trade the legs of the box separately, as only part of your box will be filled and you will be stuck with the other part at unfavorable prices if the market moved. Only a long-term study could show which strategy is better in the long run.
- It may only work with small boxes. I think the individual legs or the put and call spread portions of larger boxes would have much less volume i.e. non-marketable limit orders may not get fills. I am just speculating here, happy to hear real success or failure stories.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Anyone else having a harder time getting fills at current treasury rate + 0.3%?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I'm also having hard time getting fills. Could be that market rates are going higher because of upcoming fed tapering. Or could be just too many people found out about this trick and that's pushing prices higher.
When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Lowest somebody got today for Dec 23 was 0.9% ($981 for $1000 wide legs) so that could be a good place to start or just under theretananaev wrote: ↑Wed Nov 03, 2021 7:44 pm I'm also having hard time getting fills. Could be that market rates are going higher because of upcoming fed tapering. Or could be just too many people found out about this trick and that's pushing prices higher.
When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
But with your method of identifying box spreads, you never know if the retail investor SOLD or BOUGHT the spread, do you? My understanding is that in the options market, at least for multi-legged options spreads, opposing client orders are rarely matched, but dealers compete for incoming client orders, and the dealers' bots are programmed to required some spread. One time when I bought one of my boxes back, there was a ca. 0.1% difference in rates (ca. 0.45% vs. 0.55%) when I bought it back vs. the rate that I paid. What I'm saying is, we cannot expect to get a rate similar to a rate from the trades history, as long as we don't know on which side the retail investor vs. the dealer was, can we?adamhg wrote: ↑Wed Nov 03, 2021 9:11 pmLowest somebody got today for Dec 23 was 0.9% ($981 for $1000 wide legs) so that could be a good place to start or just under theretananaev wrote: ↑Wed Nov 03, 2021 7:44 pm I'm also having hard time getting fills. Could be that market rates are going higher because of upcoming fed tapering. Or could be just too many people found out about this trick and that's pushing prices higher.
When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Is true you won't know which side is taking and which side is adding liquidity, but I'd argue the history still gives you the range, unless you assume only one side ever makes trades. Starting at 0.9 gives you at least no worse than the last trade. If it were a buyer rather than a seller, then you start going up as you otherwise would have anyways. The top end of the range today was about 0.94-0.95% and so I'd expect to be filled at worst in that area.comeinvest wrote: ↑Wed Nov 03, 2021 11:43 pmBut with your method of identifying box spreads, you never know if the retail investor SOLD or BOUGHT the spread, do you? My understanding is that in the options market, at least for multi-legged options spreads, opposing client orders are rarely matched, but dealers compete for incoming client orders, and the dealers' bots are programmed to required some spread. One time when I bought one of my boxes back, there was a ca. 0.1% difference in rates (ca. 0.45% vs. 0.55%) when I bought it back vs. the rate that I paid. What I'm saying is, we cannot expect to get a rate similar to a rate from the trades history, as long as we don't know on which side the retail investor vs. the dealer was, can we?adamhg wrote: ↑Wed Nov 03, 2021 9:11 pmLowest somebody got today for Dec 23 was 0.9% ($981 for $1000 wide legs) so that could be a good place to start or just under theretananaev wrote: ↑Wed Nov 03, 2021 7:44 pm I'm also having hard time getting fills. Could be that market rates are going higher because of upcoming fed tapering. Or could be just too many people found out about this trick and that's pushing prices higher.
When you say "current treasury rate", do you look at the 2 year or 3 year treasury? I'm selling Dec 23 options. I'm assuming 2 years, right?
I can't speak to the 20% spread, but arguably one side could be more illiquid than the other as well. Especially in these times with nearly unlimited liquidity, there might be much fewer entities willing to sell back their loans so to speak of they had no better alternative for it. Or it could have been as simple as the rate had moved away since you sold the box. Hopefully the history will give us a better idea as these things happen
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I'm surely not dismissing the utility of your tool. Just saying, from my understanding, I would assume that given a certain daily range, I would expect to get filled at the higher end of the yield range when I sell a box (all other things being equal, i.e. the market not moving etc.), as the lower end of the yield range probably represents retail or other non-market makers buying that box. At least that's my understanding. I asked a similar question a while ago on Elite Trader, and if I remember right, the consensus was that there is no retail broker that allows viewing the complex order book of SPX options, i.e. only pro software allows this. So I must assume that all retail orders will be filled by dealers, and the retail clients will always pay the spread. (By "spread" I don't mean the spread of the visible quotes that are implied from the legs, which are rather meaningless, but the spread for combination box orders that the dealers' bots are programmed with.) Doesn't seem like a fair game in this age of supposedly free flow of information, but it is what it is.adamhg wrote: ↑Thu Nov 04, 2021 12:07 am Is true you won't know which side is taking and which side is adding liquidity, but I'd argue the history still gives you the range, unless you assume only one side ever makes trades. Starting at 0.9 gives you at least no worse than the last trade. If it were a buyer rather than a seller, then you start going up as you otherwise would have anyways. The top end of the range today was about 0.94-0.95% and so I'd expect to be filled at worst in that area.
I can't speak to the 20% spread, but arguably one side could be more illiquid than the other as well. Especially in these times with nearly unlimited liquidity, there might be much fewer entities willing to sell back their loans so to speak of they had no better alternative for it. Or it could have been as simple as the rate had moved away since you sold the box. Hopefully the history will give us a better idea as these things happen
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Yep agree completely. I think that's a good expectation to set, that the best rates are probably more of a starting point than a targetcomeinvest wrote: ↑Thu Nov 04, 2021 1:34 am I'm surely not dismissing the utility of your tool. Just saying, from my understanding, I would assume that given a certain daily range, I would expect to get filled at the higher end of the yield range when I sell a box (all other things being equal, i.e. the market not moving etc.), as the lower end of the yield range probably represents retail or other non-market makers buying that box. At least that's my understanding. I asked a similar question a while ago on Elite Trader, and if I remember right, the consensus was that there is no retail broker that allows viewing the complex order book of SPX options, i.e. only pro software allows this. So I must assume that all retail orders will be filled by dealers, and the retail clients will always pay the spread. (By "spread" I don't mean the spread of the visible quotes that are implied from the legs, which are rather meaningless, but the spread for combination box orders that the dealers' bots are programmed with.) Doesn't seem like a fair game in this age of supposedly free flow of information, but it is what it is.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Any chance the boxtrades.com site could be updated to include the new 5yr SPX options?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
How about /ES options boxes, please?
Also, do you capture SPXW options too, or just SPX?
It looks like there are different kinds of SPXW: Same expiration as SPX but PM-settled; end-of-month about a year out; weekly and quarterly.
On an unrelated note, I'm having a bit of a hard time understanding why there are AM and PM settled options with the same expiration, and how one would pick one or the other.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
This video does a good job explaining the differences between AM and PM settled options https://www.youtube.com/watch?v=Gn_hectm2eU. For a box spread it probably makes no difference.comeinvest wrote: ↑Thu Nov 04, 2021 6:19 pmHow about /ES options boxes, please?
Also, do you capture SPXW options too, or just SPX?
It looks like there are different kinds of SPXW: Same expiration as SPX but PM-settled; end-of-month about a year out; weekly and quarterly.
On an unrelated note, I'm having a bit of a hard time understanding why there are AM and PM settled options with the same expiration, and how one would pick one or the other.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
The video says nothing about why both AM and PM options exist even with the same expirations, and why anyone would prefer either one or the other. Even if it's not relevant to the scenario of box spreads.stay_the_course wrote: ↑Thu Nov 04, 2021 6:40 pm This video does a good job explaining the differences between AM and PM settled options https://www.youtube.com/watch?v=Gn_hectm2eU. For a box spread it probably makes no difference.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I filled 10000 at an implied 1.66% rate for 2026. Adam, were you able to catch it?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Caught my first 2025 and 2026 today. Not sure if the 2026 was you, but this is what I have:
Code: Select all
Date Rate Dte Credit Amount V LowS High Und Expiry LowCall LowPut HighCa HighPut
2021-11-05 18:25:18 0.0126 1504.23 -474050 500000 1 2000 7000 SPX 2025-12-19 2627.94 78.39 89.33 2280.28
2021-11-05 14:36:45 0.0158 1868.39 -9190 10000 1 4600 4700 SPX 2026-12-18 887.03 750.94 837.43 793.24
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
My data source is just my brokerage which doesn't support futures / future options unfortunately so I can't do /ES. Shouldn't the rates be similar or are the DTEs too different?comeinvest wrote: ↑Thu Nov 04, 2021 6:19 pm How about /ES options boxes, please?
Also, do you capture SPXW options too, or just SPX?
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The data source is also limited in something like 3000+ symbols that it'll allow me to stream. So I sort the list descending by expiry to prioritize longer dated options. Some SPXW used to make it onto the list, but after the 2025 and 2026 expirations came out, it only goes up mid-way through 2022 now so all weeklies are excluded.
Are people actually trading weeklies for boxes? I am guessing those are scalps or directional bets rather than for refinancing margin debt or is there a benefit in having such a short term loan that I'm overlooking?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Can I verify this trade with yall?
If I hit transmit here, I'd get $485.38 cash credit and owe $500 on 2024/12/19, is that right?
If I hit transmit here, I'd get $485.38 cash credit and owe $500 on 2024/12/19, is that right?
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Yeah that's me. Cool that I might have made the first trade.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I traded weekly boxes to "pad" longer boxes, and to reduce financing cost on opportunistic trades. For wider boxes, the rates were similar to longer boxes. So yes, there are use cases for short boxes.adamhg wrote: ↑Fri Nov 05, 2021 2:24 pmAre people actually trading weeklies for boxes? I am guessing those are scalps or directional bets rather than for refinancing margin debt or is there a benefit in having such a short term loan that I'm overlooking?comeinvest wrote: ↑Thu Nov 04, 2021 6:19 pm How about /ES options boxes, please?
Also, do you capture SPXW options too, or just SPX?
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I don't mean to disappoint you, but the 5-year treasury is at 1.05%, which means you paid a high slippage margin. (Although I'm not sure what duration the 5-year point on the yield curve would be equivalent to. If someone has more insight, please let me know.)
And regardless of what rate precisely you got, I think borrowing at this maturity is not a good idea, if it is for portfolio leverage. The 5-year usually has high risk-adjusted returns, which means you pay other people's profit. But maybe you used the loan for other purposes like real estate.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
Would you suggest 2-3 yr out boxes? Is there a good place to look for expected future yields? I think this is the current yield right? https://www.treasury.gov/resource-cente ... data=yieldcomeinvest wrote: ↑Fri Nov 05, 2021 5:20 pmI don't mean to disappoint you, but the 5-year treasury is at 1.05%, which means you paid a high slippage margin. (Although I'm not sure what duration the 5-year point on the yield curve would be equivalent to. If someone has more insight, please let me know.)
And regardless of what rate precisely you got, I think borrowing at this maturity is not a good idea, if it is for portfolio leverage. The 5-year usually has high risk-adjusted returns, which means you pay other people's profit. But maybe you used the loan for other purposes like real estate.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
If the purpose is to leverage a stocks and/or bonds portfolio, I personally would use between 3 and 12 months contracts, depending on the slope on the short end, unless the curve is flat and near zero like the past year or so. (And even then one could argue to use shorter lengths, as rates might go negative, but this is arguable.) If you think of it, if you use 2-year, 5-year, etc., loans, you are taking the opposite position of investors who uses 2-year, 5-year, etc., treasuries in their portfolios. Intermediate-term treasuries have historically had high risk-adjusted returns. In contrast to mortgage loans, the box loan is marked-to-market, which means in the beginning your annual financing cost is not only the yield to maturity, but you have to add the yield curve rolldown return that you pay to the counterparty based on the yield curve slope.parval wrote: ↑Fri Nov 05, 2021 7:37 pmWould you suggest 2-3 yr out boxes? Is there a good place to look for expected future yields? I think this is the current yield right? https://www.treasury.gov/resource-cente ... data=yieldcomeinvest wrote: ↑Fri Nov 05, 2021 5:20 pmI don't mean to disappoint you, but the 5-year treasury is at 1.05%, which means you paid a high slippage margin. (Although I'm not sure what duration the 5-year point on the yield curve would be equivalent to. If someone has more insight, please let me know.)
And regardless of what rate precisely you got, I think borrowing at this maturity is not a good idea, if it is for portfolio leverage. The 5-year usually has high risk-adjusted returns, which means you pay other people's profit. But maybe you used the loan for other purposes like real estate.
To top it off, the marked-to-marked value of your short box position would positively correlate with your equities - not good in case of a stock market crash.
Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I'm not sure how much to be bothered by the real risk-adjusted return of the 5yr. What is it, like -2% or something? Moreover, I'm totally fine with an average nominal rate of 1.6% locked in over the next 5yrs. Less headache, more certainty. I will 100% be leveraged over the next 10-15 years of my life (early in the lifecycle).
Finally, it's $10,000. Well worth the lesson if I'm totally off-base. I'd love to hear more; it's not been entirely convincing so far.
Finally, it's $10,000. Well worth the lesson if I'm totally off-base. I'd love to hear more; it's not been entirely convincing so far.
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Re: Box Spreads as Loans - Interactive Brokers IBKR - 2021
I agree it's a good deal. I think it is useful to compare to alternatives of 5+ years term. I can get a 1.49% seven-year auto loan from a local credit union, which would be a great rate if one were buying a car regardless. But that is impossible to scale and it only works if you would buy a car regardless. This morning I borrowed $5,000 for two years at 0% unsecured. While that is a fantastic deal and your example of 10 grand is attainable, it would not be realistic to scale that to large amounts of money. With box spread financing, the rate is good and the sky is the limit, at least for a seven-figure pleb like me.msun641 wrote: ↑Sat Nov 06, 2021 6:22 am I'm not sure how much to be bothered by the real risk-adjusted return of the 5yr. What is it, like -2% or something? Moreover, I'm totally fine with an average nominal rate of 1.6% locked in over the next 5yrs. Less headache, more certainty. I will 100% be leveraged over the next 10-15 years of my life (early in the lifecycle).
Finally, it's $10,000. Well worth the lesson if I'm totally off-base. I'd love to hear more; it's not been entirely convincing so far.