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We all know that there are many factor models (CAPM, Fama-French 3...) and trading strategies (momentum trading...) in equity market. I wonder whether there are any analogous factor model and momentum trading strategy in option market.

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Options price is mainly influenced by its underlying price, volatility of underlying assets, time until expiration, and interest rates.

There are also momentum indicators that can be used in options trading to identify if the options are overbought or oversold.

For example:Relative Strength Index It measures the speed and change of securities' price movement RSI = 100 – [100 / ( 1 + (Average Gain / Average Loss ) ) ]

RSI >=70, overvalued

RSI <=30, undervalued

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factor model is used to help us understanding the risk and pnl source. So for option, you know its risk is mainly determined by the greeks.

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