Chapter 27. Delta-Neutral Trading[*]
[*] Chapters with more advanced content are marked with an asterisk and can be passed over by beginners during the first reading of this book.
Delta-neutral trading can take on a variety of different forms and encompasses much more material than can be covered in this one chapter. There are delta-neutral strategies designed to generate profits, as well as delta-neutral strategies designed to protect profits. In this chapter, the basic concept of delta-neutral portfolios is discussed, and an example is used to demonstrate how trading a delta-neutral position can generate profits.
Before discussing delta-neutral trading, it is worthwhile to review the concept of the “delta” of a financial instrument (stock, ...