Basic Points

• Delta-neutral hedging is a risk management technique which attempts to use option strategies without taking on directional risk (measured in units of delta).
• All options and option structures have a delta measurement which shows the directional exposure. 
• With a standard x100 equity option multiplier (multiplied times the listed price to reach the actual cash value), delta is equated to the effect of one share. Nonlinear dynamics aside, if long a 42-delta call, then this has the same immediate directional exposure of 42 shares. 
• But even if delta neutral, there is still risk from vega (vulnerability to implied volatility) and from gamma (vulnerability to suddenly increasing directional risk). 
• Dealers in the market reliably delta-hedge, which creates mechanical flows that can explain and predict forces of market movement. 

Advanced: Mechanics

In order to delta-hedge as traders and therefore neutralize our own directional risk, the net deltas of a position should be monitored and kept near delta zero, or within a range of comfort (which some call delta neutral instead of delta zero). For example, if you buy a 43 delta put, then you could buy 43 shares to neutralize the directional risk. And then if the underlying security moves sharply down and the put's deltas increase to 63, you could sell 20 of your shares to keep the directional risk neutral.

Expert: Greek Implications and Strategy

Regarding strategy, if you are long options then you are long gamma, and delta-hedging is used offensively to lock in profits. The idea is to make more money from this than what is lost from theta decay (time burn). By delta-hedging aggressively like this, you would be trading against the direction of the market movement. 

But if short options then you are short gamma, and delta hedging is done defensively, which means trading in the same direction as market movement. Inversely, the goal here is to make more money from theta decay than what is lost from delta hedging.

By reflecting on how we would respond to our own portfolio positioning in this regard with gamma risks and opportunities, we can understand how market makers think when they balance their own books in market-moving ways.