What is meant by Neutral Strategies

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A market-neutral strategy is a type of investment strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in one or more markets, while attempting to completely avoid some specific form of market risk.

Neutral market trading strategies are popular because investors can make profits when an underlying security does not move in price or stays within a tight range of prices, and can be carried out using a variety of methods such as going long and short in similar stocks, and using options or other derivatives positions.

Neutral strategies can be constructed using derivatives such as options contracts. When buying options in the components of an index and sell options on the index itself, it is called a dispersion or correlation trade.