# Read the whole multi-leg ticket

**OPT-F04 · Core Options · Beginner**

**Lesson question:** How do several rights and obligations become one payoff?

Original fictional examples; educational writing, not live market data, orders or production approval.

## By the end

- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.

**Prerequisites:** OPT-F01

Read BUY or SELL, quantity, call or put, strike and expiry before the net price. A two-dollar spread is not a complete description. A multi-leg ticket is a signed inventory list, and the graph should be calculated from that exact list.

One quantity or expiry mistake can change the strategy entirely.

## Understand the mechanism

Use positive quantities for long options and negative quantities for shorts. Compute nonnegative intrinsic first, then apply the signed quantity. The short holder owes the long holder's intrinsic value; the option itself does not have negative intrinsic.

Same expiry with different strikes is a vertical. Same strike with different expiries is a calendar. Different strikes and expiries is a diagonal. A condor has four coordinated legs, and a ratio deliberately changes quantities.

## Walk through the process

Calculate opening cash, individual leg P/L and combined P/L at a chosen price. Then move through each strike and explain the slope changes. This reveals why a graph bends instead of asking the learner to memorize its outline.

A coordinated limit order may reduce legging risk but does not guarantee execution. Selling protective legs first can briefly create a position unlike the intended spread. Teaching tickets are simulations, not order controls.

## A worked example

Buy one 100 call for 4.20 and sell one 105 call for 2.20, same November 20, 2026 expiry and 100 multiplier. At settlement 103, the long has three intrinsic and loses 120 relative to its premium. The short has zero intrinsic and earns 220. Combined P/L is +100 before costs.

At 110, intrinsic is ten on the long and five on the short, leaving a five-point difference. The cap comes from the legs, not an arbitrary line drawn by software.

## Graph: Read the whole multi-leg ticket—worked comparison

**Horizontal:** Illustrative observation  
**Vertical:** Example value

Fictional data from the written example. The chart organizes the comparison; its shape is not a forecast.

Complete numerical data are embedded in `scripts/options-strategies/OPT-F04.js` and displayed as an accessible table in the HTML lesson.

## What would invalidate the reading?

Replacing the short with another expiry and continuing to use the same-expiry width formula deletes the value of the remaining clock. It is now a different valuation problem.

## Check your understanding

### How can the spread profit at 103 while its long call loses?

**Answer:** The short earns 220 and the long loses 120, for +100.

**Why:** Whole-position arithmetic is the sum of signed legs.

### What is the critical failure to avoid?

**Answer:** Replacing the short with another expiry and continuing to use the same-expiry width formula deletes the value of the remaining clock. It is now a different valuation problem.

**Why:** Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome. **Critical risk check.**

## Takeaway

Return to the question: How do several rights and obligations become one payoff? State the observed facts, the assumptions and the failure condition separately.

## References and provenance

The cited references support definitions and conventions. The teaching prose, tickets and numerical scenarios are original; they are not attributed as historical market observations.

- [OCC Equity Options specifications](https://www.theocc.com/clearance-and-settlement/clearing/equity-options-product-specifications)

- [OCC Options Disclosure Document](https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document)