Short Leg

Filed Under » ,
Dictionary Says

Definition of 'Short Leg'

Any contract in an option spread in which an individual holds a short position. If a trader has created an option spread by purchasing a put option and selling a call option, the trader's short position on the call would be considered the short leg.
Investopedia Says

Investopedia explains 'Short Leg'

Option spreads are positions created by options traders by buying and selling an equal number of option contracts, with differing strikes, on the same underlying security. Option spreads are used to limit overall risk by ensuring that gains and losses are restricted to a range. Additionally, option spreads can serve to bring the costs of options positions down, since traders will collect premiums from contracts in which they short.
Search results for

'Short Leg'

  • How To Manage Bull Put Option Spreads

    http://www.investopedia.com/articles/optioninvestor/05/051005.asp
    ... There is less than 3% chance of the position ever touching the short leg of the
    spread in the 35 days before expiration, but if we wait too long to adjust the ...

  • Vertical Bull and Bear Credit Spreads

    http://www.investopedia.com/articles/optioninvestor/02/041202.asp
    ... the spread, will clarify. Vertical spreads typically have two legs: the
    long leg and the short leg. The key to determining whether ...

  • An Alternative Covered Call: Adding A Leg

    http://www.investopedia.com/articles/optioninvestor/06/AddLegCoveredCall.asp
    ... Therefore, we add another leg to this trade - a diagonal (across time) leg. ... put can
    pick up any additional premium from the price decline (being short Delta). ...

  • Option Spreads: Tips And Things To Consider | Investopedia

    http://www.investopedia.com/university/optionspreadstrategies/optionspreads7.asp
    ... In most equity options brokerage accounts, the short leg across months is margined
    as a naked option, which can significantly impact overall performance due to ...

  • Option Spreads: Debit Spreads Structure | Investopedia

    http://www.investopedia.com/university/optionspreadstrategies/optionspreads3.asp
    ... strike of the call at 82. We paid $300 for this leg. Figure 2 – Short
    call and put option characteristics. Had we not created a ...

  • Options Greeks: Position Greeks | Investopedia

    http://www.investopedia.com/university/option-greeks/greeks6.asp
    ... So individually speaking, each leg of this short strangle has its own Delta, positive
    0.25 for the put and negative 0.25 for the call, but when we combine them ...

  • Options Greeks: Delta Risk and Reward | Investopedia

    http://www.investopedia.com/university/option-greeks/greeks2.asp
    ... that the spreads are out-of-the-money and have smaller Delta on the long leg compared
    with the position Delta on the short legs (ie, 1 long leg and 2 short legs ...

  • New Leaders For The Next Bullish Leg

    http://stocks.investopedia.com/stock-analysis/2008/New_Leaders_For_The_Next_Bullish_Leg.aspx
    ... this time around aren't the same ones that led the prior bullish leg. ... After that,
    he switched gears completely, becoming an analyst at a short-term trading ...

  • Option Spreads: Diagonal Spreads | Investopedia

    http://www.investopedia.com/university/optionspreadstrategies/optionspreads6.asp
    ... to choosing a back-month leg that is not the same as the front-month leg. ... and buy
    the October for 10, we would have the maximum profit at the short strike of ...

  • Pencil In Profits In Any Market With A Calendar Spread

    http://www.investopedia.com/articles/optioninvestor/08/calendar-spread-options-strategy.asp
    ... sell a call against this stock if you are neutral over the short term ... To learn more
    about this strategy, see An Alternative Covered Call: Adding A Leg.) Plan to ...

Related Articles

Partner Links