The Meb Faber Show - Better Investing

Wes Gray & Jack Vogel, Alpha Architect - BOXX, HIDE, & Why Trend Following is Timeless. PLUS: Embarrassing Career Moments | #474

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Apr 5, 2023
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INSIGHT

Box Spreads Explained

  • A box spread is a four-leg option trade isolating a fixed payoff in the future.
  • It involves buying and selling calls and puts to eliminate market risk, acting like a Treasury bill.
INSIGHT

Box Spread Advantages

  • Box spreads offer T-bill returns plus a potential premium, from 0 to 50+ basis points.
  • They may also offer better tax efficiency compared to traditional T-bills.
INSIGHT

Box Spread Risks

  • The primary risk with box spreads is counterparty risk with the OCC.
  • However, the OCC has a similar credit rating to the US government and implicit government backing.
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