Multi-leg options strategies are combinations of two or more options contracts traded together as a single position. Instead of just buying a call and hoping the stock goes up, you combine calls and puts at different strikes and expirations to create positions with defined risk, defined reward, and a specific thesis about where the stock is headed. This is where options trading goes from gambling to strategy. The most common multi-leg strategies are vertical spreads, straddles, strangles, iron condors, and butterflies. Each one has a different risk profile and works best in different market conditions.

A vertical spread is the gateway multi-leg strategy. A bull call spread involves buying a call at one strike and selling a call at a higher strike, both with the same expiration. You pay less than buying a naked call because the sold call offsets some of the cost. Your max profit is capped at the difference between the strikes minus what you paid. Your max loss is limited to what you paid. For example: buy the $100 call for $5, sell the $105 call for $2. Net cost: $3. Max profit: $2 ($5 spread minus $3 cost). Max loss: $3. The trade-off is clear — you give up unlimited upside for a much cheaper, defined-risk position.

Straddles and strangles are volatility plays — you're betting the stock will make a BIG move, but you don't care which direction. A straddle buys a call AND a put at the same strike price. A strangle buys a call above the current price and a put below it, making it cheaper but requiring a bigger move to profit. These are popular around earnings because big moves are expected. The risk is that if the stock doesn't move enough, both options lose value and you're out the premium you paid. Straddles and strangles are bets on movement, not direction.

Iron condors and butterflies are strategies for when you think the stock will stay in a range. An iron condor sells a call spread above the current price and a put spread below it, collecting premium on both sides. If the stock stays between your short strikes by expiration, you keep all the premium. The butterfly is similar but more precise — it profits most when the stock pins exactly at a specific price. These strategies let you profit from time decay and sideways markets while keeping your risk defined. The key with all multi-leg strategies: know your max profit, max loss, and breakeven BEFORE you enter the trade.