Market Neutral
Categories: Derivatives, Trading
You run a hedge fund, and you just don't care whether the overall market (call it the S&P 500 as defining "market" to you) goes up or down. You are equally positioned in your portfolio with longs and shorts.
The manner in which you're actually positioned is complex. You just own some stocks long, i.e. you bought 'em, vanilla, nothing fancy. For others, you shorted puts 20% down. For other positions on the short side, you just shorted stocks or sold calls and/or other myriad dials you turned to create your longs and your shorts.
But as of this moment, for where the market is and where your portfolio is, for the next moves 5% up or down, you are neutral as to where the market goes. All you care about is how your specific positions run, relative to everything else. That's how you earn your 2 and 20.