The Skinny on Options: Abstract Applications

A Range of Delta Neutrality

The Skinny on Options: Abstract Applications

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

In today’s Skinny, we offer up a clear, concrete takeaway for determining Delta Neutrality in your portfolio. Rather than executing a perfectly neutral portfolio at all times, which is nearly impossible to actually implement, most traders establish predetermined ranges of Delta Neutrality. This allows portfolio Delta to float a bit around zero, while still minimizing the directional bias of the portfolio. Specifically, we learn that approximately +/- 0.2% of Net Liquidating Value will be an acceptable range of neutrality for most traders.

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