While media stories about in the past have often focused on funds generating big returns, the broad majority of hedge funds make stability and stableness of return, rather than magnitude, their primary goal.

They may sell shares short to cover themselves against a drop in stock values. They may buy put options, which give them the right to sell stocks at a specified future price, in order to lock in a sell price in the event of a severe market drop. They may buy interest-paying bonds or trade claims of companies undergoing reorganization, insolvency, or some other corporate reorganising, counting on events in a company, rather than more random macro trends, to affect their investment.

There are a mixture of strategies for investors to look at. The more moderate of these strategies are generally not correlated to equity markets, and deliver regular profits with low volatility.

More aggressive hedge funds that seek larger returns, albeit with higher volatility, are also available. These strategies often have a directional bias to the market, either long or short (long/short equity), or may seek to speculate on future market moves in equity markets, currency markets and bond markets (global macro funds). Aggressive funds have the capacity to enjoy high gains, but can also be susceptible to volatile returns.

Investors must provide certain warranties relating to their minimum net worth and their understanding of the risks involved in investing in a SSIF. They must provide an accountant certificate which is less than 6 months old indicating that the Applicant has either net assets above a minimum amount or an income above a minimum threshold.

Typically this restriction is that The Investor has:
(i) Net assets of at least $2,500,000; or
(ii) A gross income for each of the last 2 financial years of at least $250,000 a year.

What does delta neutral trading do? It is simply designing an options position which will make money no matter if the stock goes up or down and increase in value as volatility in the market rises even if the stock remained stagnant. Yes, literally making money 3 ways, up, down or stagnant!

So what’s the catch? Yes, there are only 2 scenarios where a delta neutral position loses money. One, when the stock remains relatively stagnant while volatility drops. When volatility drops, extrinsic value of options get depressed as the possibility of large moves decreases, thereby decreasing the value of the options in the position even if the stock did not move. Two, the stock did not move enough to cross the breakeven point of the position. Yes, all trading positions have break even points which must be exceeded before money can be made.

Even with these limitations, delta neutral trading continues to offer the greatest possibility of profit under conditions of volatility and extreme uncertainty