Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Leg

What it is:

In the brokerage world, a leg is an individual component of a multistep trade.

How it works (Example):

Let's say John Doe wants to do an options straddle, which involves buying call and put options with the same expiration date. John Doe's broker executes the first leg, which is to buy the call, and then he executes the second leg, which is to buy the put.

Why it Matters:

Timing is everything is multistep trades. Accordingly, in John's case, his broker should try to execute both legs simultaneously, or at least very close in time, in order to avoid the risk of price changes for those products as the trading day progresses.
 

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