Definition
A multi-leg strategy combines two or more option contracts — and sometimes shares of the underlying — into a single coordinated position. Each individual contract is a leg, and the legs are chosen so their combined payoff matches a particular market view or risk tolerance.
Common examples include vertical spreads, straddles, strangles, iron condors, and calendar spreads. By pairing legs, a trader can cap losses, reduce the premium paid, or profit from a narrow range of outcomes rather than a single directional move.
Why it matters
How it works
The trader decides on a market thesis — direction, range, or volatility — then selects legs whose combined profit-and-loss curve expresses it. A bull call spread, for instance, buys a lower-strike call and sells a higher-strike call, trading away unlimited upside for a cheaper, capped position.
Brokers accept multi-leg orders as a single combination ticket, executing all legs at a defined net debit or credit. This avoids "legging risk" — the danger that the market moves before every leg is filled.