From Theory to Practice

Delta Neutrality

| Jun 15, 2016
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    From Theory to Practice

    Delta Neutrality

    Jun 15, 2016

    Delta Neutrality is the process of structuring your portfolio such that your portfolio delta is zero. In other words, all of your long delta is canceled out by all of your short delta, and you have no directional exposure. The goal of Delta Neutrality is that by eliminating this directional risk, we can build a portfolio that focuses solely on non-directional components, like time or volatility. While Delta Neutrality certainly offers us some useful insights, both pragmatically and philosophically, we see in this segment that it is difficult to implement in its pure, unadulterated form.

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