Leg risk

Definition

Leg risk is the chance that a single leg of a multi-leg trade executes while one or more complementary legs fail to execute. In practice this means you may end up with an unbalanced position after attempting an arbitrage that required simultaneous fills.

In context on Polymarket

On Polymarket, leg risk appears whenever you attempt trades that rely on multiple fills to lock an edge — for example buying both outcomes in a binary spread, or purchasing several outcomes in a multi-outcome market. Because Polymarket uses a Central Limit Order Book (CLOB) and offers both limit and market-style FAK orders, fills can occur in sequence rather than atomically. If one leg fills and another does not, you are exposed to price movement, fees, and resolution risk on the leftover position.

Common causes

• Order execution sequence: Partial or staggered fills due to order matching on the CLOB.
• Slippage and tick-size changes: Prices can move between legs; tick size can tighten near extremes, changing execution behavior.
• Liquidity depth: Thin books make it likelier that only the top-of-book quantity fills.
• Fee and taker constraints: Taker fees and daily relayer limits (for Builder routing) can influence fill probability.

How traders think about it

Traders view leg risk as a source of execution risk rather than fundamental market risk. The theoretical arbitrage (for intra-market binary or combinatorial trades) assumes simultaneous fills; real-world execution does not. Accepting leg risk means accepting potential exposure to market moves, additional trading to rebalance, or holding positions through resolution.

Mitigation techniques

• Use FAK (Fill-And-Kill) market helpers for fast execution when appropriate, but remember FAK can still partially fill and cancel remainder.
• Size your orders to match the known available depth at the quoted prices.
• Prefer markets with deeper liquidity to reduce the chance of single-leg fills.
• Place conservative limits or staggered orders with clear rules for abandoning partially filled arbitrages.
• Account for fees, slippage, and resolution timing when deciding whether to seek a rebalance or to close an orphaned leg.

See also

• /glossary/fak
• /glossary/slippage

Closing note

Leg risk is a core execution hazard for any multi-leg strategy, including intra-market arbitrage. The spread math that defines an edge assumes simultaneous completion of all legs; in practice you must manage the possibility that some fills arrive and others do not.