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As a non-directional trader, I'm trying not to be dependent on the market direction. My goal is to make money in any market. To achieve that goal, I need to constantly balance my portfolio in terms of direction and volatility. The first goal is being as delta neutral as possible. That means starting most trades with balanced deltas. What does it mean? If the stock is trading at $50, and I buy a 50 straddle, I'm delta neutral. If I buy a 55 straddle, I'm delta negative. The puts which are ITM have higher delta than the calls which are OTM. So if the stock goes down, the delta of the puts starts increasing faster than delta of the calls decreasing, overall delta becomes even more negative and the trade makes money. However, if the stock goes up, the trade becomes more delta neutral, the puts are losing more than the calls are gaining, and the trade is likely to lose money. What happens if I started delta neutral (with 50 straddle in our example) and the stock went up to 55? It depends if the trade became profitable by that time. If the answer is positive, we can close the 50 straddle and roll to 55 straddle. But what if the profit is still insufficient? In this case, we can let the trade run hoping for the stock continue rising, but we also risk a reversal. One way to hedge yourself, at least partially, is opening the next trade slightly delta negative. This will balance the total delta exposure of the portfolio. For example, after opening the RUT Iron Condor with RUT at 785, the trade became delta negative after the recent run to 825. So I might choose opening my next trades with slightly positive delta to balance my total delta. To be truly non-directional, it is not enough to balance the deltas. We also need to balance our theta and vega exposure. That means that we will have to have a mixture of theta positive trades, like Iron Condors and calendars, and theta negative plays, like our earnings plays. To balance the vega, we need a mixture of vega positive and vega negative plays. ICs are vega negative - they benefit from decrease in IV. The aim is to open an IC on a down day when IV spikes. Calendars tend to be vega positive as well. The reason is that longer dated options are supposed to benefit more from IV increase than shorter dated options. Our earnings plays are vega positive. They will be the most profitable when IV jumps. SO having a mix of strategies will help us to be ready to all scenarios in terms of overall market volatility. This post has been promoted to an article