A three-leg vanilla (3leg) lets traders easily price some of the more popular strategies in the CM market.
These include the following:
Butterflies
Butterflies traded in the commodity market (also known as the three-vol butterfly) generally consist of 3 call (or 3 put) options rather than the more familiar Butterfly traded in the FX market. It is mainly used by investors looking to lock in a profit if the index trades within a given range. It is also a popular tool used by program traders to seek out arbitrage opportunity.
Seagulls
The seagull is comprised of a collar plus an additional option. The additional option can be:
Sold. This makes the collar cheaper, but also caps the scope of the hedge (limiting the upside profit) should the value of the underlying rise.
Bought. This makes the collar more expensive. However as well as maintaining the protection of the collar (limiting the downside risk) it also provides unlimited potential to gain from substantial favorable swings in the value of the underlying.
Pricing a two-leg vanilla in SDX Commodities & Energy
You can only automatically enter into a three-leg vanilla (3leg) in the Single Option page. To price a three-leg vanilla in the Portfolio page, you need to build it manually out of its individual components.