A separate exchange book where multi-leg option orders trade as one package against other packages, rather than leg by leg.
Exchanges maintain a book for spreads alongside the book for single series. A vertical-spread order rests there as a single instrument with its own bid and ask, and can trade against another trader's opposite spread or against liquidity providers quoting the package.
This is why spreads often fill inside the sum of the individual legs' spreads. You are not crossing two markets; you are trading one.
Example: the XYZ $50 call is 3.00 / 3.30 and the $55 call is 1.40 / 1.60. Legging costs 1.90. The complex book quotes the $50/$55 spread at 1.60 / 1.75. Buying the package at 1.70 saves $20 per spread versus the natural-price and eliminates leg-risk.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.
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