0-9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


Featured video
External links


Hide links

Leg Out or 'legging out' means to close an Options Strategy involving a combination of Long or Short puts or calls by buying or selling each individual option contract (or multiple thereof).

Legging Out is most likely to occur because one side of a multi-Leg strategy (e.g. a Credit Spread) has been tested. Either the trader wants to prevent further loss without having to wait for all legs that form the overall strategy to be closed (e.g. for highly illiquid markets). Alternatively, they may wish to allow the untested side to continue to try and reduce the loss from the Leg they are closing.

With some strategies that involve more than two legs, such as an Iron Condor, the trader might Leg out of one spread. This will involve selling two legs, but could still be considered legging out because the position becomes a different one than when it was opened.

Legging out where a Long option is sold before a Short option is purchased back can be considered a potentially higher risk strategy since the trader has a naked Short with theoretically unlimited liability.
Rating: 0/5 (0 votes cast)
Contributed by: Ralph Windsor

External Links

Suggest a Link

Should You Leg Out of an Iron Condor or Short Vertical?

An article discussing the pros and cons of legging out of vertical spreads.

Rating: 0/5 (0 votes cast)


There are currently no comments for this term.

Post a Comment

You must be registered and logged in to post a comment.


There are currently no videos for this term.