Was anyone trading short box spreads during high volatility events? I understand they have a defined max loss but I'm wondering if it's possible to get a margin call when volatility beings to rise significantly. For example, August 2024 volatility event, covid, etc.
Eventually this skew would work itself out of the trade but I'm just wondering what types of unrealized losses you could experience when volatility skews one leg of the trade.
Thanks!
Short box spreads and volatility
byu/Silver_Star_Eagles inoptions
Posted by Silver_Star_Eagles
1 Comment
I assume you’re taking about box spreads in European options.
It’s purely an interest rate play. Whether vol goes up or down doesn’t affect the box spread – if it did, there would be an arbitrage opportunity with T-Bills.