Short Leg

Posted in Finance, Accounting and Economics Terms, Total Reads: 859

Definition: Short Leg

When considering an option spread, one in which an investor holds a short position is known as a short leg. If a option has a long call and short put, then in this option spread pull is short leg.

In short leg there is an obligation to sell as opposed to a Long leg where there is an obligation to buy.

Option spreads are utilised to have a control on overall risk by making sure that profits and losses are limited to a range.

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