Delta neutral


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Delta neutral

Describes value of a portfolio not affected by changes in the value of the asset on which the options are written.

Delta Neutral

Describing a portfolio containing option contracts where changes in the price of the underlying assets do not change the value of the portfolio. One can construct a delta neutral portfolio, for example, by buying calls and puts on the same underlying asset where each has an equal but opposite delta with respect to the other. So when the price of the underlying asset changes, the two options change prices in opposite directions so that there is no net effect on the value of the portfolio.
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Creditex was at the forefront of introducing electronic trading to the CDS market over a decade ago, including protocols such as mid-based trading and Delta Neutral Auctions (DNA).
There are some investment strategies that are delta neutral and often make money while the market remains stable.
A delta neutral strategy calls for taking a delta equivalent position in the underlying security.