--- title: "Box spreads on Nifty options: the loan and its charges" description: "How a box spread on Nifty options pays a fixed amount, why it is a loan, and how its implied rate looks against the bill and the charges, on NSE data." source_url: "https://www.rupeecase.com/learn/path-18/module-18-5-box-spreads" --- [Path 18 5 of 14](/learn/path-18/)Box spreads with European index options[Next 18.6](/learn/path-18/module-18-6-parity-deviations) Wednesday 10 Jun 2026. Buy the 23,000 call and the 23,500 put, sell the 23,500 call and the 23,000 put, all in the 30 Jun expiry. Whatever Nifty does, that package pays 500 points on 30 Jun, because the options cancel the index. The four settle prices added up to 497.35. Paying 497.35 today for 500 in 20 days is a loan, and it lends at 9.72% a year against a bill yield of 5.11%. On paper that is 2.65 points of interest. The statutory charges on the same four legs came to 2.58, and what was left was 0.07. This is a box spread. It reads like a bond and trades like four options, and the gap between the two is the lesson. Every figure is an NSE end of day settlement, dated, so nothing is live. 3By the end you can 1. Name the four legs of a box and show why the index drops out at expiry. 2. Work out the implied rate and compare it with the bill yield and the charges. 3. Say why boxes of one width give scattered rates from settle prices, and why expiry makes it worse. Watch in the terminal: what do estimated costs take? A short tutorial on sample data. ## The idea, plainly A box is a bull call spread and a bear put spread on the same two strikes. The calls gain when the index rises, the puts when it falls, and the two sums always add to the distance between the strikes. ### What is a box spread, and why is it a loan? Take two strikes, a lower one L and an upper one U. Buy the call at L and sell the call at U: that is the bull call spread. Buy the put at U and sell the put at L: that is the bear put spread. At expiry the index ends below L, between them, or above U. In each case the four legs together are worth U less L. The index drops out, as it does in the conversion of module [I30](/learn/path-18/module-18-2-conversions-and-reversals). Box price = C(L) − C(U) + P(U) − P(L) Span = U − L Rate = (span / price − 1) × 365 / days The maths: a box is two parity gaps Put call parity says the call less the put at a strike equals the discounted future less the strike. Take it at L and at U and subtract. (C − P) at L − (C − P) at U = discount × (U − L) The left side is the box price. So a box is the conversion at one strike minus the conversion at the other, and a box rate that differs from the bill yield is the difference between two parity gaps, module [A17](/learn/path-18/module-18-6-parity-deviations). The continuous rate is the natural log of span over price, over the time in years. For short boxes it is within a rounding error of the simple rate used here. A box is two spreads that add to a fixed payment, so its price is a discounted loan The four legs of the 10 Jun 2026 box, 30 Jun expiry. Illustration of the logic: the prices are in the example below. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. A bought box pays the same at every index level: a flat line One lot of the box bought at the 10 Jun 2026 settle prices, 30 Jun expiry. The line is flat because the span is fixed, and it sits at Rs 172 before any charge, which is the interest on the loan. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. Read 2 more paragraphs, 178 words A fixed payment at a known date has a price today, and that price is the payment discounted at some rate. Pay less than the discounted amount and you have lent at a rate above the bill. Pay more and you lent below it. Selling the box is the other side: you receive the price today and owe the span at expiry, which is borrowing. Nifty options are European and cash settled, so no leg can be exercised early. That feature is what lets the payoff stay fixed, and it is why the box can be described this way for index options. Researchers have used box rates from index options as a market read of the risk free rate, because a box needs no view on the index. That works where bid and ask quotes exist at many strikes and the options trade in size. An Indian end of day settle file is a weaker input. It has one end of day price per leg, not a quote, and the box turns four of them into a rate. ### Why do boxes imply such different rates on one day? If the market priced every box off one interest rate, boxes of the same width would show about the same rate. They do not. On 10 Jun I priced six boxes of 500 points, with the lower strike running from 23,000 to 23,500 in steps of one hundred, using only strikes where each of the four legs traded in at least two thousand contracts. The implied rates ran from 8.1 to 30.8 percent a year. The bill yield was 5.11%. Six boxes of one width give six different rates, all above the bill yield Simple rate a year from NSE settle prices of the 30 Jun expiry, each box 500 points wide, 10 Jun 2026. The bill yield was 5.11%. Source: NSE end of day data, computed by RupeeCase. As of 10 Jun 2026. | Lower strike | Rate a year, % | | --- | --- | | 23,000 | 9.7 | | 23,100 | 8.1 | | 23,200 | 24.4 | | 23,300 | 30.8 | | 23,400 | 18.1 | | 23,500 | 13.4 | Read one more paragraph, 184 words A real interest rate does not differ by that much between neighbouring strikes. What differs is the settle prices. Each one is that strike's own end of day price, set from its own trades, and a strike that traded little near the close gets a price by NSE's own method. They are four prices from four order books, not one moment's quote for the package. Tick rounding is the small part: one tick on each leg, in the same direction, moves the box by 0.20 points, which with 20 days left is only 0.73% a year. The 23,300 box sat 6.90 points under the discounted span, about 35 ticks on each of its four legs. With one day left the same tick is 14.6% a year, so near expiry even rounding swamps the rate. On 29 Jun the box between 24,500 and 25,000 was priced at 507.15, above its own 500 points, which implies a rate of −515%. The settle price is a record of the close and not a quote anyone offered. A box rate read from it is mostly noise. ### What do the charges leave? Here are the statutory charges of the 23,000 to 23,500 box, the best traded of the six, at the rates in force from 1 Apr 2026. Brokerage and the margin on the sold legs are left out. * **STT on the sold options:** 0.15% of the premium on the 23,500 call and the 23,000 put, which is 0.64 points a unit. * **STT on exercise:** 0.15% of the intrinsic value of a long leg that finishes in the money. Nifty closed on 30 Jun at 23,865.75, above both strikes, so only the long 23,000 call is exercised: 1.30 points. Had the index closed between the strikes, both long legs would be in the money and the sum of the two intrinsic values is the span, which is 0.75 points of STT. * **Exchange charge, SEBI fee, GST and stamp duty:** 0.64 points together. The SEBI fee is charged on the premium and again on the value of the call exercised and the call assigned at expiry. The charges take almost all the interest a box pays Points a unit for the 23,000 to 23,500 box bought at settle prices on 10 Jun 2026 and held to the 30 Jun expiry, at the 1 Apr 2026 rates. Brokerage, margin and the bid and ask are not counted. Source: NSE end of day data, computed by RupeeCase. As of 30 Jun 2026. Read 2 more paragraphs, 158 words Exercise STT depends on where Nifty closes, which you do not know when you open the box. Inside the strikes it is fixed at 0.75 points. Outside them only one bought leg is in the money, and its intrinsic value grows with the distance, so a close far below the lower strike or far above the upper one costs more than that. Other frictions sit outside the file. The short call and the short put carry SPAN margin from NSE Clearing, so the cash is tied up on top of the box price, and lending through a box is not the same as lending the price alone. Four legs need four fills. One or two ticks of slippage across the four fills take what the charges leave. The box also has to be held to expiry for the span to be certain, and for index options that settlement is the index close for expiries before 7 Dec 2026. ## Worked example: the 10 Jun box and one day before expiry The legs are priced at the settlement prices of Wednesday 10 Jun 2026, expiry Tuesday 30 Jun. The lot is 65 units. The bill yield is the one NSE and FBIL data give for that chain. | One unit | Side | Settle price | | --- | --- | --- | | 23,000 call | Buy | 467.85 | | 23,500 call | Sell | 206.25 | | 23,500 put | Buy | 456.80 | | 23,000 put | Sell | 221.05 | | Box price | | 497.35 | | Span, paid at expiry | | 500 | | Span discounted at the bill yield | | 498.60 | Read 2 more paragraphs, 212 words The box cost 497.35, which is 1.25 points under the discounted span. Lending 497.35 for 20 days at the bill yield would have earned 1.39 points. The box earned 2.65, or Rs 172 on a lot. That is the part of the story that reads well. The charges were 2.58 points, Rs 168 on a lot, which leaves 0.07 points, Rs 4, against 1.39 from the bill. After charges the box lent for less than the bill would have paid, and it needed four fills and the margin on two sold options to do it. Now one day before expiry. On 29 Jun the same kind of box, 24,500 to 25,000, was priced at 507.15 for a payment of 500. A price above the payoff would be a loan at a negative rate of 515%. That is not a market rate. It is four settle prices that do not line up. The shorter the time to expiry, the more any price error is multiplied when scaled to a year, and a box rate near expiry is mostly a measure of that error. That is why the tool for this lesson shows the rate of every box of one width side by side, and not one rate. ## The common mistake The belief: A box spread is a risk free loan that pays more than a T-bill. Three things stand in the way. The rate in the file is mostly an artefact of four settle prices that do not line up: six boxes of one width on 10 Jun gave rates from 8.1 to 30.8 percent a year. After the charges of the best traded box, 0.07 points were left against 1.39 from the bill on the same money. And what you would actually hold is four options with margin on two of them, filled at four separate prices. The fixed payoff at expiry is real arithmetic. The profit is not. SEBI's Aug 2026 study of individual equity derivatives traders found that 87.7% lost money in FY26. A payoff that cannot move still has to be bought at a price that can. The term this section turns on: Box spread From the module glossary; every term is in the Learn glossary too. Source: Module 18.5, Box spreads with European index options. ## Key takeaways * A box is a bull call spread plus a bear put spread. * It pays the span at expiry whatever the index does. * The price is the span discounted, so the box is a loan. * Unaligned settle prices make box rates scatter, most of all near expiry. * After charges the 10 Jun box earned less than the bill. * The payoff is fixed. The profit is not. Watch in the terminal: what does "Same money in NIFTY 50" mean? A short tutorial on sample data. **Before you trade.** Derivatives trading carries a high risk of loss. SEBI's study "Profitability of Individual Traders in the Equity Derivatives Segment (FY25 to FY26)" (August 2026) found that 87.7% of individual traders in equity F&O made net losses in FY26, with aggregate net losses of Rs 91,685 crore. [Read the SEBI study](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) What does Box spreads with European index options cover?Four options that pay a fixed amount are a loan in disguise. Read the rate the settle prices imply, then count what the legs cost to hold. It works through The idea, plainly, Worked example: the 10 Jun box and one day before expiry, The common mistake, Key takeaways. It is module 18.5 of Path 18, Arbitrage and Relative Value, about 11 minutes of reading, free. TTry it ## Parity and box rate, on the same example. Synthetic futures, the parity gap and the rate a box implies. Dated NSE end of day data, nothing live, no orders. **Parity and box rate**, Nifty, 10 Jun 2026, 30 Jun 2026 expiry. [Open the parity and box rate](/learn/tools/box-rate?chain=NIFTY_2026-06-10_2026-06-30) AF&O on RupeeCase ## Hedging only, in development F&O at RupeeCase will do one job: protect a portfolio you already own, by a rule published before it runs. No speculation, no naked option selling, no leveraged bets. It is not available yet. [How hedging will work](/hedging)[Sign up for RupeeCase](https://invest.rupeecase.com/signup) [No hedgeFalls with the marketWith a putA floor, for a premiumIllustration with made up numbers, not a product and not a recommendation.](/hedging) QQuick check ## 10 questions, 7 to pass. Each attempt draws 10 of the 15 questions in this module's bank, and a retake draws a fresh set. A pass gives this module's Certificate of Completion. Your result stays on this device and counts towards the Path 18 certificate. 7 of 10 correct passes module 18.5 Every answer is explained when you check; a retake is always free. Source: RupeeCase Learn quiz rules (70% to pass). Passed ### Certificate ID Download PNGPrint or save as PDF[Check the ID](/learn/certificates/verify) Self paced and unproctored. A record of completing free education by RupeeCase; not a NISM certificate and not endorsed by NISM, NSE, BSE or SEBI. It qualifies no one to deal, advise or publish research. CCheck yourself ## Path 18 so far. Your quick check results on this device, stop by stop. Stop 5 of 14 on Path 18 Arbitrage and Relative Value: every live stop, this module ringed. Source: RupeeCase Learn, Path 18. 1. [18.1Cash futures arbitrage and the Nifty 50 Arbitrage indexNot yet](/learn/path-18/module-18-1-cash-futures-arbitrage) 2. [18.2Conversions and reversalsNot yet](/learn/path-18/module-18-2-conversions-and-reversals) 3. [18.3Pair trading intuition: correlation is not cointegrationNot yet](/learn/path-18/module-18-3-pair-trading-intuition) 4. [18.4Futures calendar arbitrage and roll dynamicsNot yet](/learn/path-18/module-18-4-futures-calendar-arbitrage) 5. [18.5Box spreads with European index optionsNot yet](/learn/path-18/module-18-5-box-spreads#quiz) 6. [18.6Parity deviations in practice: what the frictions costNot yet](/learn/path-18/module-18-6-parity-deviations) 7. [18.7Cointegration toolkit: Engle Granger, ADF, half life and z scoreNot yet](/learn/path-18/module-18-7-cointegration-toolkit) 8. [18.8Pair trading with Indian stock futuresNot yet](/learn/path-18/module-18-8-pair-trading-with-stock-futures) 9. [18.9Mean reversion against momentumNot yet](/learn/path-18/module-18-9-mean-reversion-vs-momentum) 10. [18.10Implied correlationNot yet](/learn/path-18/module-18-10-implied-correlation) 11. [18.11Dispersion trades: construction and risksNot yet](/learn/path-18/module-18-11-dispersion-trades) 12. [18.12The correlation risk premiumNot yet](/learn/path-18/module-18-12-correlation-risk-premium) 13. [18.13Baskets, PCA stat arb and Johansen testsNot yet](/learn/path-18/module-18-13-pca-stat-arb) 14. [18.14Kalman filter hedge ratiosNot yet](/learn/path-18/module-18-14-kalman-filter-hedge-ratios) 15. [TPath test, 30 questionsNot yet](/learn/path-18/module-18-14-kalman-filter-hedge-ratios#pathTestSection) Path 18 in reading time: 143 minutes over 14 modules Minutes of reading per module, this one in amber. Source: RupeeCase Learn, Path 18. Explore next ## Put the module to work. * [Free module 12.6The real cost of a trade: STT, exchange fees, SEBI fee, GST and stamp duty7 min read](/learn/path-12/module-12-6-cost-of-an-fo-trade) * [Free module 14.6Expiry and settlement: cash, physical, exercise and STT8 min read](/learn/path-14/module-14-6-expiry-and-settlement) * [ToolOption payoff builderLegs on a dated Nifty chain, breakevens and charges](/learn/tools/payoff-builder) Community ## Join my WhatsApp group. Scan the code, fillFill one short form, and join my WhatsApp group. Slides, sources, factsheets and the rebalance logs live there, and members join a daily Google Meet with me. New to RupeeCase? [Getting started](/getting-started) [See the terminal](/terminal) [Sign up for RupeeCase](https://invest.rupeecase.com/signup) [Join the WhatsApp group](https://forms.gle/C6HMtM1Z2GfeocQV7) [One form, one group](https://forms.gle/C6HMtM1Z2GfeocQV7)Scan with your phone camera SSources ## Go to the source. 10 sources, NSE the most cited The publisher of each source listed below. Source: Module 18.5 source list. 1. [NSE, equity derivatives contract specifications (index options are European and cash settled)](https://www.nseindia.com/static/products-services/equity-derivatives-contract-specifications) NSE 2. [NSE Clearing, settlement mechanism for futures and options](https://www.nseclearing.in/clearing-settlement/equity-derivatives/settlement-mechanism) NSE 3. [NSE Clearing, margins: SPAN and exposure margin](https://www.nseclearing.in/risk-management/equity-derivatives/margins) NSE 4. [NSE, securities transaction tax on equity derivatives](https://www.nseindia.com/static/products-services/equity-derivatives-securities-transaction-tax) NSE 5. [NSE circular NSE/FATAX/73524, STT rates from 1 Apr 2026](https://nsearchives.nseindia.com/content/circulars/FATAX73524.pdf) NSE 6. [NSE circular NSE/FA/73061, transaction charges from 1 Mar 2026](https://nsearchives.nseindia.com/content/circulars/FA73061.pdf) NSE 7. [NSE, stamp duty, charges and taxes for first time investors](https://www.nseindia.com/invest/first-time-investor-stamp-duty-charges-taxes) NSE 8. [SEBI, Profitability of individual traders in the equity derivatives segment, FY25 to FY26 (Aug 2026)](https://www.sebi.gov.in/reports-and-statistics/research/aug-2026/study-profitability-of-individual-traders-in-the-equity-derivatives-segment-fy25-fy26-_103835.html) SEBI 9. [NISM, Series VIII Equity Derivatives certification examination](https://www.nism.ac.in/revamp-nism/equity-derivatives/) NISM 10. [van Binsbergen, J., Diamond, W. and Grotteria, M., Risk-free interest rates, Journal of Financial Economics (2022)](https://doi.org/10.1016/j.jfineco.2021.06.012) Paper GTerms ## 4 terms from this module. Box spreadA bull call spread and a bear put spread on the same two strikes and expiry. The four legs pay the distance between the strikes at expiry, whatever the index does. Implied box rateThe interest rate at which the box price grows to its span by expiry. It is the span over the price, less one, scaled to a year. SpanThe distance between the two strikes of a box, in index points. It is the fixed payment the box makes at expiry. Exercise STTSecurities transaction tax of 0.15% of the intrinsic value of a bought option that finishes in the money and is exercised, from 1 Apr 2026. [All 230 terms in the glossary](/learn/glossary) [Question people askIs a box spread in India "risk free"?A short answer with a dated chart](/learn/questions/is-box-spread-risk-free)[Related module14.10 Put call parity and synthetic positions9 min, Intermediate](/learn/path-14/module-14-10-put-call-parity)[Related module18.2 Conversions and reversals9 min, Intermediate](/learn/path-18/module-18-2-conversions-and-reversals)[Pillar guideDerivatives and Quant115 modules across paths 12 to 19](/learn/derivatives) Education only, not investment advice, a research report or a recommendation to buy, sell or hold any security. RupeeCase (QC Alpha Technologies Pvt Ltd) is not registered with SEBI as an investment adviser or research analyst. Contracts and prices shown are for illustration only, come from NSE end of day files at least 30 days old, and are not recommendatory. Derivatives trading carries a high risk of loss.