What does it mean by Single-Leg & Multiple Leg in Stock Trading?
Most option traders does not trade simple call and put options, but they trade a combination of them in a single option order. This type of trading strategy is known as multi-legged options trading. A multi-leg option order will allow the trader to buy and sell a number of different options simultaneously without placing separate orders. The basic components of a multi leg options order are the call and put options, which are available for stocks and futures. Multi-legged trading includes a variety of trading strategies such as straddle trading, strangle trading, ratio spread and butterfly spread etc. These strategies can be used to profit from a variety of market condition, bullish, bearish or neutral. Multi-legged options trading require complex analyses with high accuracy. There are lots of options trading systems which enable traders to finding out suitable trading opportunities. The main advantages of multi-legged options trading strategies include profit from any market condition, requirement to place only one order to buy or sell a number of options, ability to perform advanced options trading strategies, etc. But as told earlier the trading requires substantial market analysis and also involves considerable risks. A simple buy or sell of a stock requires one trade. A "pair trade" requires two trades -- in a pair trade, you short one stock while long the other stock in the same industry. Anytime you have a complex trade that requires multiple trades, each prequisite trade is called a "leg." Right now, iron condors in options are very popular that that overall trade requires four legs: buy a call, sell a call, buy a put, sell a put; keep in mind that all (four) legs must be executed at once or the complex trade is not executed. In summary, it's just a term we use in the industry to describe a complex trade that requires two or more trades with each prerequisite trade being a leg of the complex trade.