Leg Out

DEFINITION of 'Leg Out'

One side of a complex option transaction. Leg out means to close out, or unwind, one leg of a derivative position. This effectively removes any additional possibility of loss or gain from that leg of the position. But if the original transaction consisted of multiple legs, legging out of one transaction leg can still leave the investor with exposure from the other legs.

BREAKING DOWN 'Leg Out'

Legging in and out can be done for many different types of options positions. Investors can leg out of strips, straps, spreads, straddles and strangles, among other positions. Legging out is done when the investor is ready to close the position. A leg simply refers to one part of the transaction, such as a straddle which has two legs made up of two options.

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