A type of order that allows an option trader to simultaneously buy or sell a number of different options that traditionally could only be achieved by placing separate orders. An option is a contract that gives the owner the right to buy or sell a security at a specific price within a specific time limit. The owner of an option contract is not obligated to exercise the option contract. Multi-leg options are two or more option transactions, or “legs,” bought and/or sold simultaneously in order to achieve a certain investment goal. Typically, multi-leg options are traded according to a particular multi-leg option trading strategy.
The underlying options that make up the multi-leg trade are regular put or call options. Customers can leverage multi-leg strategies to capitalize on their feeling on the market: bullish, neutral, or bearish.This type of order is primarily used in multi-legged strategies such as a straddle, strangle, ratio spread and butterfly
The basic components of a multi leg options order are the call and put options, which are available for stocks and futures. Multi-legged trading includes a variety of trading strategies such as straddle trading, strangle trading, ratio spread and butterfly spread etc. These strategies can be used to profit from a variety of market condition, bullish, bearish or neutral. Multi-legged options trading require complex analyses with high accuracy. There are lots of options trading systems which enable traders to finding out suitable trading opportunities.This type of order gives the average option trader the ability to incorporate advanced options strategies that consist of many options by placing one order and only paying one commission. For example, one multi-leg order can be used to buy one call option with a strike price of $35 and one put option with a strike price of $35 (straddle strategy). Historically, this strategy could only be achieved by placing two separate orders
The main advantages of multi-legged options trading strategies include profit from any market condition, requirement to place only one order to buy or sell a number of options, ability to perform advanced options trading strategies, etc. But as told earlier the trading requires substantial market analysis and also involves considerable risks.