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Neutral Trading Strategies
Neutral options trading strategies are employed when the options trader does not know whether the underlying stock price will rise or fall. Also known as non-directional strategies, they are so named because the potential to profit does not depend on whether the underlying stock price will go upwards or downwards. Rather, the correct neutral strategy to employ depends on the expected volatility of the underlying stock price.
Bullish on Volatility
Neutral trading strategies that profit when the underlying stock price experience big moves upwards or downwards include the long straddle, long strangle, short condors and short butterflies.
Bearish on Volatility
Neutral trading strategies that profit when the underlying stock price experience little or no movement include the short straddle, short strangle, ratio spreads, long condors and long butterflies.