In Options Trading, whats the diff bet BUY WRITE and DELTA NEUTRAL?

Answer 1

A buy-write is a type of transaction. It is a spread order in which you buy the stock and sell a specific call option on the stock with a single order.

Delta neutral a type of spread in which the delta of the total spread is close to zero. If you are not familiar with the greeks, delta is the amount an option changes price with a small movement in the price of a stock. A long stock position has a delta of 1.00 per share, while options have a delta ranging from -1.00 to + 1.00 per share. In general, an at-the-money call will have a delta of roughly 0.50 and an at-the-money put will have a delta of roughly -0.50.

So, if a stock is selling for $100 per share and you were to buy 100 shares of the stock, you could make a delta-neutral spread by either
(1) buying 2 September $100 strike puts or
(2) selling 2 September $100 strike calls.
The value of a delta-neutral spread will not change when there is a small movement in the price of the stock. However, as the price of the stock changes the delta of different options changes, so what was originally a delta neutral spread is not likely to remain delta neutral if there is a large change in the price of the stock. To keep the spread delta neutral the spread has to be adjusted by buying or selling shares or options.

Answer 2

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