Direction Neutral, Direction Biased, and
Direction Indifferent
As typically traded, volatility-selling option strategies are direction neutral.
This means that the position has the greatest results if the underlying price
remains in a range—that is, neutral. Although some option-selling strategies
—for example, a naked put—may have a positive or negative delta in the
short term, profit potential is decidedly limited. This means that if traders
are expecting a big move, they are typically better off with option-buying
strategies.
Option-buying strategies can be either direction biased or direction
indifferent. Direction-biased strategies have been shown throughout this
chapter. They are delta trades. Direction-indifferent strategies are those that
benefit from increased volatility in the underlying but where the direction of
the move is irrelevant to the profitability of the trade. Movement in either
direction creates a winner.