Do I get a cookie too if I explain how I’d use them?
1BSM is right though, you need to know how to apply each strategy. That’s almost as important as knowing the details of how they’re constructred.
In regards to your box spread question: You’re earning a guarnteed return, there is no risk to the box spread, so your return must equal the risk free rate. Perhaps you’re definition leaves you a bit shakey here. I’d define the box as:
Long bull call spread + long bear put spread.
So buy a call and sell a put at price P and sell a call and buy a put at price Q, where P < Q. Model that out and you’ll see how it works.
everything you guys have said so far is correct, except with some of ‘thespacebar’ definitions. i think your bull put spread and bear put spreads are wrong. check it well. its the other way round.
also i agree with geo well. its about its applicability and how to determine which stra is best fit for which situation.
also i think getting familiar with their graphs is soo soo key in order to know how their payoffs and upside and downside features look like.
you should also know about the expressions for their max profit, lossand break even price of the underlying for the vignette.