OptionsOptions strategies

Delta Neutral

Written by Ashesh Mathur (Individual Contributor)
Fri Dec 11 2020
Implied volatility vs. Actual Volatility
See how MarketXLS helps you take advantage in the markets.
Download Option Templates →
Implied volatility vs. Actual Volatility

Delta neutral strategies are options strategies that are designed to create positions that aren’t likely to be affected by small movements in the price of a security. This is achieved by ensuring that the overall delta value of a position is as close to zero as possible. Before moving forward click here for a quick overview of the options greeks.

Why do delta neutral trading?
How many times have you been in a situation wherein you take a trade after much conviction, either long or short, and right after you initiate the trade the market moves just the other way round? All your strategy, planning, efforts, and capital go for a toss.
Delta neutral traders essentially want no directional risk. This means these traders are betting on other factors that affect options prices such as time decay and changes in implied volatility.

How to make a profit using delta neutral trading?
In delta neutral trading you are planning to keep the delta of options to 0. This means you need to profit from other factors the options price depends upon.

  • By the time decay
    When a position is delta neutral, it is not affected by small movements made by the underlying stock, but it is still affected by time decay as the premium value of the options involved continues to decay. An options trading position can be set up to take advantage of this time decay safely without taking a significant directional risk and one such example is the Short Straddle options strategy which profits if the underlying stock remains stagnant or moves up and down insignificantly.


  • By Volatility
    By executing a delta neutral position, one can profit from a change in volatility without taking a significant directional risk. This options trading strategy is extremely useful when implied volatility is expected to change drastically soon.


  • By creating volatile option trading strategies
    Even though delta neutral positions are not affected by small changes in the underlying stock, it can still profit from large, significant moves. One example of such an options trading strategy is the famous Long Straddle. This is because a typical delta neutral position is still Gamma positive. The gamma increases position delta in the direction of the move, allowing the position to gradually profit in either direction.

Delta Neutral Hedging

Delta Neutral Hedging is an options trading technique used to protect a position from short term price swings. The advantage of using delta neutral hedging is that it not only protects your position from small price changes during times of uncertainty such as near resistance or support levels, but it also enables your position to continue to profit from that point onwards if the stock rises or falls strongly.

Imagine you have 100 shares of a company stock trading at $ 200. After your analyses, you feel the fundamentals of the company are strong and the price will increase in the long run but may fall in the short run. You can create a delta neutral position and insure yourself against any potential losses in the short term.
Your delta of the initial position is 100 (as you own 100 shares). You need a position of -100 to make your overall position delta neutral. The simplest way to do this would be to buy 200 at the money put options each with a delta of -0.5.
Overall delta = (100 * 1) + (-0.5 * 200) = 0

Whether to short call or long put?
One thing to note is we can achieve delta neutral positions by either short call options or long put options as both have negative deltas. However, time decay works in your favor if you short call options but only provides limited downside protection. On the other hand, long put provides unlimited downside protection but the time decay work against you.

Additional tip

• Use the qm_stream_delta function to get the live delta value from marketxls.
• Use the options strategies template and modify the template to your need.



None of the content published on marketxls.com constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The author is not offering any professional advice of any kind. The reader should consult a professional financial advisor to determine their suitability for any strategies discussed herein.

Interested in building, analyzing and managing Portfolios in Excel?
Download our Free Portfolio Template
Download Option Templates

Top 100 Gainers Today

Top 100 losers Today

Real gdpReal personal consumption expReal private investmentReal govt expenditureReal net exportsReal exportsReal importsFederal receiptsFederal outlaysFederal surplus or deficitFederal debtReal private investment nonresidentialReal private investment residentialReal potential gdpReal personal incomeReal personal consumption exp monthlyRpce durable goodsRpce nondurable goodsRpce servicesPersonal savings rateMonetary baseCurrency in circulationBank reservesMoney supply m1Money supply m2Sp500DjiaWilshire indexVixFinancial stress indexCorporate bond index aaCorporate bond index bbbFederal funds rateTreasury rate 3mTreasury rate 1yTreasury rate 5yTreasury rate 10yTips 5yTips 10yBond yield aaaBond yield baaMortgage rate 15yMortgage rate 30yUs dollar weighted averageUsdollar to euroUsdollar to poundYuan to usdollarCanadiandollar to usdollarYen to usdollarCpiCpi wo food energyCpi foodCpi energyChain price indexChain price index wo food energyGdp price deflatorPpi final demandPpi finished goodsPpi materialPpi crude goodsPpi final demand wo food energyPpi finished goods wo food energyHouse price indexHouse price index 20cityCrude oil priceGasoline priceNatural gas priceIndustrial productionCapacity utilisationInventoriesSales retail foodVehicle sales light weightManufacture orders durablesManufacture orders capital goodsLoansConsumer credit outstandingCorporate profitsHousing startsBuilding permitsResidential constructionEmployees nonfarmEmployees privateEmployees goods producingEmployees service providingEmployees governmentUnemployment rateInitial cliamsAverage weeks unemployedJob openingsHiresSeparationsQuitsLayoffs dischargesHours of productionHourly earningsReal outputPopulationLabor forceLabor force participation rate
Search for a stock

Top MarketXLS Rank stocks

Cowen Inc. logo

Cowen Inc.

Optionable: Yes
Market Cap: 859 M
Industry: Capital Markets
52 week range    
Booz Allen Hamilton Holding Corporation logo

Booz Allen Hamilton Holding Corporation

Optionable: Yes
Market Cap: 11,928 M
Industry: Business Services
52 week range    
Rush Enterprises Inc. Class B Common Stock logo

Rush Enterprises Inc. Class B Common Stock

Optionable: No
Market Cap: 2,846 M
Industry: Auto & Truck Dealerships
52 week range    
Amdocs Limited logo

Amdocs Limited

Optionable: Yes
Market Cap: 10,201 M
Industry: Software - Infrastructure
52 week range    
NBT Bancorp Inc. logo

NBT Bancorp Inc.

Optionable: Yes
Market Cap: 1,640 M
Industry: Banks - Regional - US
52 week range    
CRA InternationalInc. logo

CRA InternationalInc.

Optionable: Yes
Market Cap: 661 M
Industry: Business Services
52 week range    
CatchMark Timber Trust Inc. Class A logo

CatchMark Timber Trust Inc. Class A

Optionable: Yes
Market Cap: 504 M
Industry: REIT - Diversified
52 week range    
America's Car-Mart Inc. logo

America's Car-Mart Inc.

Optionable: Yes
Market Cap: 683 M
Industry: Auto & Truck Dealerships
52 week range    
ManTech International Corporation logo

ManTech International Corporation

Optionable: Yes
Market Cap: 3,917 M
Industry: Software - Application
52 week range    
CACI International Inc. Class A logo

CACI International Inc. Class A

Optionable: Yes
Market Cap: 6,536 M
Industry: Information Technology Services
52 week range    

More Features

Stand with Ukraine

As the situation in Ukraine escalates, many of us in MarketXLS are left with emotions too overwhelming to name. If you’d like to show your support, but aren’t sure how to, we want to help make it easier for you to act.

For any amount donated, we’ll extend your MarketXLS subscription for double of the donated amount. Please send proof of your payment to support@marketxls.com to avail the extention

From all of us at MarketXLS, thank you!