Market Sentiment Indicator Analysis - Option Greeks

This article finds sentiment factors that reflect the views of professional investors in the market by dismantling
options greeks, and explains and back-tests these factors. This research addresses two pain points: firstly, current
research on options is more focused on option hedging strategies and pricing, and not enough research has been
done on options reacting to the underlying price; secondly, current research on market sentiment indicators is
mostly focused on technical analysis and macro analysis, etc. This mode of analysis either only reflects the trading
behaviour of retail investors in the market, or is too far from actual market trading behaviour distant.
This study intends to find the changes in the trading capital flows of professional market investors through option
greeks, and then study the investment behaviour patterns and logic of professional market investors, and use
these behaviours to make reasonable inferences about the current position of the market and the future trends.
The empirical results show that such factors work well for both short-term and long-term market judgements.