Can someone explain to me what is direction/non-directional risk? Went through few sites but couldn't understand much.
These terms mean different things in different circles.
Options traders would consider any exposure to price changes in the underlying to be a directional risk. A hedged option position still has non-directional risk though, since option prices can change without any change in the price of the underlying. Equities traders would generally not consider exposure to a price change in a stock as necessarily constituting directional risk. They are more likely to only consider exposure to price changes in the broad market or sector as a directional risk. Macro traders generally only consider exposure to changes in major aggregates (e.g. crude oil prices, the dollar) to constitute directional risk.