Options Spreads And Legging Into Individual Options

This trading video discusses options spread legging, which is the entry or exit of one of the option legs that make up the spread.

There are 2 primary reasons for legging into or out of an options spread:  (1) the potential to buy the spread at a better price and sometimes even at a credit (2) the potential for exiting at a bigger profit and sometimes more than the original width of the spread.

However, for legging to be an effective strategy for improving entry prices and/or the profit of the option spread, it is important to use trading method timing setups:

  • If buying a call spread – buy the call on the setup entry and sell the call to complete the spread at a profit target or a reject of resistance
  • If exiting a call spread – sell the long call with a sell setup and buy back the short at a profit target or a reject of support

Additionally discussed in this options spread legging video:

  • Timing a long call spread exit after a gap down exit
  • Buying a long call spread and where the legs were entered
  • Problem with exit timing – example of a long debit spread that could have been exited for 3.00 was legged out of by a trader for 1.80

Options Spreads Legging Video

Options Spreads And Legging Into Individual Options