A portfolio (of assets) whose delta is zero, making it insensitive to small changes in the prices of its assets. It is a portfolio of related financial securities, whose value remains unchanged when small or limited changes take place in the value of the underlying securities. A delta-neutral portfolio “neutralizes” or offsets the response to market movements for a limited range so that the net overall change in the value of the portfolio is zero or very close to zero.

Being delta-neutral implies that a portfolio consists of positions with positive and negative deltas that, overall, balance out (offset each other), or that cause the net change of the position to be zero. In other words, the effect of market movements is neutralized. In reality, delta changes with changes in underlying prices, making the ability to neutralize such positions is only valid for a specific narrow price range. Depending on the leg involved in a delta neutralization (a long or on a short option leg), market volatility may be beneficial  or detrimental to the entire portfolio.

Such portfolios are instrumental for option market makers who take positions in options but do not want to incur losses that may arise from unfavorable underlying asset price changes. These portfolios are also useful for investors who have expectations about mispricing opportunities (mispriced options relatively to each other), but are uncertain about the direction of changes in the underlying asset price.