Before we know the option strategy, we should know the specific factors that affect the option price. From a mathematical point of view, after the option price is derived from different parameters, the relationship between the two changes expressed in Greek letters is obtained. The specific formula is as follows:

After disassembling the formula, we can get five factors that have obvious influence on the option price, such as Delta, Gamma, Theta, Vega and Rho, and a group of other factors that are relatively negligible and have no obvious influence on the option price.

Delta:Delta is the ratio of the option price change to the underlying asset price change, which is used to measure the influence of the directional change of the underlying price on the option price. The Delta value of call options varies from 0, 1, and the timing of put options is-1, 0. When the Delta is positive, the increase of the underlying price will make the option price rise, and when the Delta is negative, the opposite is true.

Gamma:Gamma is the ratio of Delta change to target price change, which is used to measure the change speed of target price. The Gamma value of option bulls is positive, and the Gamma value of shorts is negative. When gamma is positive, the sharp change of target price will be beneficial to investors, while when gamma is negative, it is the opposite.

θ: θ is the ratio of option price change to option expiration time change, which is used to measure the change of option intrinsic time value. The θ of long options is usually negative, which represents the loss of time value in options, while short options are the opposite.

Vega:Vega is the ratio of the option price change to the underlying asset volatility change, which is used to measure the impact of volatility change on the option price. Because volatility is a two-way concept (both ups and downs are fluctuations), the Vega values of both call options and put options are positive. When Vega is positive, the increase of implied volatility of the underlying price will be beneficial to investors, while when Vega is negative, it is the opposite.

Although Vega and Gamma have similar profit performance, they are usually collectively referred to as volatility trading indicators, but their profit logic is different. Vega value describes the sensitivity of implied volatility, and Gamma describes the sensitivity of the change degree of the final price point, that is, realized volatility.

Rho:Rho is the ratio of option price change to interest rate change, which is used to measure the impact of volatility change on option price. Rho value is positive. When the interest rate rises, it means that the present value of option exercise price decreases, which in turn increases the value of call option and decreases the value of put option. When Rho value is negative, it is the opposite.

The influence of these factors on option price changes can be understood in the form of factor investment, and the allocation of these factors and the risk management of position exposure will directly affect the income of option strategy. .

Therefore, more and more institutions are not satisfied with the benefits brought by the explanation of the impact of the above-mentioned * * * indicators on the option price, so other user-defined indicators and high-order partial derivative indicators based on the current indicators have emerged to try to describe the option price in a higher dimension and find the Alpha benefits.