What Is a ‘Delta-Neutral’ Trading Strategy?

A delta-neutral strategy is an options trading approach designed to profit from changes in implied volatility or time decay, rather than the direction of the underlying asset's price. The trader constructs a portfolio of options and/or the underlying asset such that the total portfolio delta is zero.

This means the portfolio's value will not change for small movements in the underlying price. Traders use this to isolate other factors, such as theta (time decay) or vega (volatility changes), for profit.