Say, 4-legged multi-leg options order with below leg

Order Qty - 100
 - Buy 1 Option1 IBM 35 call 20160925
 - Sell 2 Option2 IBM 25 put 20160827
 - Buy 3 Option3 IBM 35 call 20150620
 - Sell 4 IBM stock leg

What would be the side of the entire complex options order above?

Because another order of same legs can come with inverted sides later, which can trade with first order?

For this purpose, I need to determine side based on some approach, so I can Buy/Sell side in each case.

What exactly is buying/selling above 4-legged(with one stock leg) mean and how to determine side in the system so as to match the identical vs inverted(opposite sides on legs) orders?


2 Answers 2


It depends on the exact structure. E.g., a butterfly can be bought or sold and every market participant understands which individual options are bought or sold given knowledge of the agreed spot level and distance of the wing from spot in regards to agreed strikes.

Please note that a butterfly can be structured as a combination of calls but also through puts due to the put-call parity argument that generally holds. I am saying this because just buying or selling "a structure" will introduce lots of ambiguity.

The above is just an example (3-legged), so an accurate answer cannot be given for the information you provided. Your 4-legged structure can turn out to be several different structures.

But I recommend you always communicate the actual legs even if you trade an option structure, most every dealer trading option structures will include the actual legs and their sides to avoid confusion.

  • $\begingroup$ what more information you need? I updated to have all leg details. $\endgroup$
    – Medicine
    Oct 17, 2013 at 20:02
  • $\begingroup$ The structure you showed is a custom structure and generally there is no specific market standard structure that matches yours. It is not even evident whether your structure is gonna be delta hedged at the outset. Hence, one cannot say that any custom structure xyz is a buy or sell unless you refer to being long or short any of the greeks. And for that you need to provide more information (such as delta, gamma, or vega of each option) in order to determine whether your structure is net delta, gamma, vega long or short $\endgroup$
    – Matt Wolf
    Oct 18, 2013 at 4:17
  • $\begingroup$ Yes I am talking about custom structures and only option attributes/leg-ratio/side/qty given for each option leg and may have upto one stock leg optionally. In that case, what would be a reasonable way to determine? For example, looking at FIX spec of ISE multi-leg options order, it allows to send exactly like above, with a net Price for entire structure and I am sure ISE determines a side for entire multi-leg order on its own and creates product so as to match with the incoming orders which may have same structures. $\endgroup$
    – Medicine
    Oct 18, 2013 at 4:29
  • $\begingroup$ I know it is sort of confusing but lets say if more buys than sells then side of Order be Buy, in case of tie do something else. Or align with the side of the leg which has the lowest expiry, if tie then lowest strike-price, if tie then Call $\endgroup$
    – Medicine
    Oct 18, 2013 at 5:23
  • $\begingroup$ I told you about the market standard practice and it is what it is. I am not familiar with ISE PIM order types, but I am almost 100% that they do not attach a side to the whole structure because it would make zero sense. My hunch is that your structure enters a crossing-engine order book and anyone seeing your order can chose to be on the other side. I do not know whether counter parties are allowed to only trade part of the structure against you or whether they have to take up everything. $\endgroup$
    – Matt Wolf
    Oct 18, 2013 at 9:07

I am a little confused about the question, but if I understand correctly, the convention is that if you BUY the complex order then positive qty is a buy, negative qty is a sell. If you're selling the order then positive qty is a sell, negative qty is a buy.

  • $\begingroup$ BUY or SELL side is not provided in order, only leg information like option attributes, leg side are given. $\endgroup$
    – Medicine
    Oct 22, 2013 at 0:22

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