The exposure created between the first and last fill of a multi-leg trade, when the position is temporarily something other than what you intended.
Every second between fills is a second of unhedged exposure. The size of leg risk is the delta of the incomplete position multiplied by how far price can move before you finish.
It is largest exactly where traders are most tempted to leg: fast markets, earnings, and zero-dte where gamma is extreme. A spread-order eliminates it entirely at the cost of a slightly worse theoretical price.
Example: you buy the XYZ $50 call for $2.30, intending to sell the $55 call for $0.80 to make a spread. In the four minutes it takes, XYZ drops $1.20. The $55 call is now $0.45. Your net debit is $1.85 instead of $1.50, and you were long 55 deltas of unintended exposure.
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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