Legal Definitions - spread eagle

Spread eagle refers to a position where a person's arms and legs are stretched out wide, similar to a star shape. In trading, it can also refer to a strategy where an investor holds contracts to buy and sell the same security or commodity, resulting in a loss on one of the contracts.

For example, an investor may buy a call option and a put option on the same stock with the same expiration date. If the stock price stays the same, the investor will lose money on one of the options. This strategy is used to defer gains and offset other taxable income.

The term "spread eagle" comes from the physical position, which resembles an eagle with its wings spread wide.