Most investors believe they can pick stocks that outperform the major averages, despite evidence that professional money managers cannot see for example: This may be the result of selective memory. If you are not one of those with great predictive powers, or you never know which way the stock market is going to move in the future, then the idea of trading a market-neutral strategy may appeal to you.

Option Trading education, strategies, graphs, charts

The position performs approximately the same, regardless of whether the market moves higher or lower. There are two groups of strategies: One that collects when the market is calm and one that produces profits when the markets are volatile. Both begin as market neutral without either a bullish or bearish bias.

Predicting a volatile market: Positions with positive gamma and negative time decay lose money as time passes, unless something good a large move happens.

Predicting a calm market: Positions with negative gamma and positive time decay earn money when the markets are stagnant. If you are uncertain about the next market move, one of these market-neutral strategies may appeal to you.

Market Neutral Option Strategy?

A very popular market-neutral strategy that prospers when the markets are non-volatile is the iron condor. Read Understanding Iron Condors , Part I.

More Articles on Options:. Getting Started Market Recaps Education Online Brokers ETFs Trade Journal. Join Over 22, Investors Receive Weekly Market Recaps directly in your email inbox!

Enter your email address. Log, Store, and Analyze Your Trades Whether you're a new or seasoned investor, the StockTrader. Step 1 - Add trades Step 2 - Mark strategies and mistakes Step 3 - Analyze your results Step 4 - Improve your trading Get Started Now.

Stock Market Recaps Join over 22, investors and sign up today for our free weekly newsletter. Most Popular 20 Must Read Investing Books 10 Trading Secrets I Wish I Knew When I Got Started How I Trade Edition 10 Great Ways to Learn Stock Trading How to Build a Warren Buffett Portfolio 5 Best Free Stock Chart Websites Compare Stock Brokers 60 Stock Tips for Investment Success 5 Best Free Stock Scanners List of 2x 3x Long ETFs Learn Technical Analysis Stock Chart Basics Top 10 Finance iPhone Apps Stock Risk Calculator Product Reviews.

Latest Market Recaps Weekly Market Recap Jun 18, Weekly Market Recap Jun 11, Weekly Market Recap Jun 04, About Contact Terms of Use Disclosures Privacy Policy. Please note that StockTrader. In some cases, StockTrader.