What is delta neutral?
Delta neutral is a multiple position portfolio strategy which consists of offsetting positive and negative deltas so that the total deltas of the assets in question make up zero. A portfolio which is delta neutral balances the movements in the market up to a certain range, to make the net change of the position zero.
Where have you heard about delta neutral?
Investors who want to remain neutral must change their portfolio holdings accordingly. The delta neutral strategy is most commonly used by options traders who use it to profit from implied volatility or occasionally from time decline of the options stock.
What you need to know about delta neutral.
The position of the asset, which is usually held at a stock position, will always have a position of positive one on a long position, and long put options will always have a delta from -1 to 0. With regards to underlying asset positions, an investor or trader can use a mixture of long and short puts and calls to balance out a portfolio and make it delta neutral.
Find out more about delta neutral.
If you are interested in delta neutral, then take a look at our page on implied volatility.