legging out

Legging Out

In a hedged investment, the act of closing one position while keeping the other open. For example, suppose one owns a stock and also holds a put option to sell that stock at a certain price in case the stock price drops significantly. In this case, legging out would involve selling the put option while continuing to own the stock.
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legging out

The closing of one side of a hedged position while leaving the other side of the hedge position open. For example, an investor might buy an October call on ExxonMobil and sell short a November call on the same stock. Subsequently buying the November call to cover the short position while continuing to hold the October call results in the investor legging out.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
The temporary regulations were meant to address a perceived abuse of taxpayers claiming a foreign currency loss by partially legging out of an integrated transaction, and they applied to leg-outs that occurred on or after Sept.
The regulations provide that if a taxpayer has identified multiple hedges as being part of a qualified hedging transaction (which is referred to as "legging into" integrated treatment), and the taxpayer has terminated at least one but fewer than all of the hedges (which is referred to as "legging out" of a transaction), the taxpayer must treat the remaining hedges as having been sold for fair market value on the date of disposition of the terminated hedge.
This results in "legging out" of integrated treatment.