Sometimes the stock market refuses to cooperate with the investors who are involved. The stock market will sometimes undergo periods of time when it is neither bullish (trending upward) nor bearish (trending downward). This can be a potentially be a frustrating time for someone who isn't trained to react under atypical circumstances.

But only experienced traders are likely to know that profits are available, even though the stock market is marking time. This is possible by using one of the neutral or non-directional strategies. By learning to trade in a neutral manner, an individual doesn't care which direction the stock market is moving. A stock can go up and a neutral trader will make money. A stock can go down and a neutral trader still has the potential to make money.

Neutral strategies involved taking more than one position in a trade, meaning there's more involvement than simply buying a call option or a put option and waiting for the result. Neutral trading can often mean buying positions on both sides of a trade, leaving a trader in a potential winning position regardless of the direction a stock takes. Neutral trading can also mean selling positions that are out-of-the-money, collecting a premium up front, and hoping the stock shows little price movement.

Many neutral strategies involve spreads, which are a limited-risk strategy that have the potential to create cash flow by putting money into a trader's account the day after the trade is opened. The losses in such trades are capped; a trader cannot lose more than the spread minus the credit received to open the trade.

Sometimes the trader enters into a neutral position, not caring which way the stock will move, but hopes for a large, dramatic price move. This often occurs when a company announces its quarterly earnings. The degree of the price move can instantaneously increase the price of either the call or the put and can sometimes result in a windfall profit that offsets the loss of the second position.

Neutral trading generally produces smaller returns in exchange for a more conservative play. Like any trade, a neutral position does come with an amount of risk, but it's typically less risky than many of the other strategies taken. The main thing is to understand which strategy to use, since employing a bullish strategy in a bear market is almost guaranteed to lead to a loss. Likewise, using a bearish strategy in a bull market will lead to a loss. The neutral strategies offer more potential leeway and don't require a trader to be right.