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Anyone familiar with Box Spread Loans? Saw this article and dug deeper. It does seem like a way to essentially borrow at a little more than comparable term Treasuries but must it must be executed flawlessly to avoid big risks.
There was a thread on BOXX in 02/2024. It uses box-spreads but the discussion then focused in tax deferral aspect that BOXX claimed. But some in media were skeptical that BOXX holders would pay gains on sale only and not the imputed interest that applies to many things. So, the risk there is an adverse IRS ruling once it has time. The ETF strategy looked complicated for slightly better TRs than T-Bills. https://www.mutualfundobserver.com/discuss/discussion/62043/boxx-etf
My point is for Box Spread loan users to consider whether their net cash outflows result in any tax deduction and the timing of it. Both of which have economic impact. It does not impact me as I am not interested in a loan. But I will bookmark this thread and study the topic when I am looking to do something with my time / bored.
If I understand it correctly, it would seem in a short box spread loan you can reinvest the proceeds received today in an ultra short bond fund which would likely create a nearly an interest free (or negative interest rate) loan by the time you owe back the “principal”. I’m not looking to arbitrage it but rather just an additional option/consideration vs securities-backed lending. But it looks like that arbitrage opportunity exists. If you borrow from a PAL you cannot use the borrowed proceeds to buy securities. With a box spread loan I think you can.
Comments
https://thefinancebuff.com/short-box-spread-vs-margin-loan-fidelity.html
https://thefinancebuff.com/long-box-spread-trade-vs-treasury-cd-fidelity.html
https://www.schwab.com/learn/story/what-are-box-spreads
https://www.schwab.com/learn/story/trader-taxes-form-8949-section-1256-contracts
Thanks, YBB
https://www.mutualfundobserver.com/discuss/discussion/62043/boxx-etf
ETF.com had a short blurb on it in 11/2025,
https://www.etf.com/sections/features/boxx-etf-doubles-size-investors-chase-tax-efficient-yield
My point is for Box Spread loan users to consider whether their net cash outflows result in any tax deduction and the timing of it. Both of which have economic impact. It does not impact me as I am not interested in a loan. But I will bookmark this thread and study the topic when I am looking to do something with my time / bored.