An order to concurrently purchase and sell options with more than one strike price, expiration date, or sensitivity to the price of the underlying asset is known as a multi-leg option.

A multi-leg options order is essentially any transaction that involves two or more options and is closed out all at once. The order is distinct from entering or exiting a multi-leg strategy one leg at a time since it consists of a mix of many contracts.

Multiple-leg options is a pricing volatility that is is anticipated but the direction and/or timing are uncertain, orders like spreads and butterflies are frequently employed to grab gains.

Multi-leg option orders enable investors to get rid of the execution risk associated with making two separate transactions to make a spread. If the orders for each leg are placed individually as two transactions, there is a chance that one leg will be completed while the other will not, either simultaneously or ever.

Due to the potential for considerable movement in the underlying stock within the time it takes for the second order to be placed, this results in an imbalanced position. Multi-leg orders guarantee execution on both sides and ensure that both legs are filled at the same price, eliminating an uneven position.

Building a multi-leg options strategy – How

Options traders have a wide variety of multi-leg methods at their disposal. Building a multi-leg options strategy can involve a trader utilize various methods such as-

·         Iron corridor that involves four contracts.

·         Long straddle requires a change in the stock price equal to the difference between the two option premiums. One of the rare multi-leg option strategies with unlimited gain is this one.

·         Long strangle purchase involves two options with different strikes and the same expiration.

When traders have a broker built to handle multi-leg options strategies with ease, they may deploy them more easily. Depending on the broker's setup, multi-leg options strategies can be executed with simplicity.

The commissions due and the broker's margin requirements should be known by traders. A trader who executes as one order can avoid taking a position without worrying about not getting executed on one of the legs.