The Greeks – Rho

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Rho – Measures the change in the option price due to a change in interest rates.

Rho is an estimate of how much the value of an option changes when interest rates move 1.00%. Rho is one of the least used Greeks. Since interest rates are normally stable the chance of an option’s price will change dramatically due to an increase or decrease in interest rates is pretty low. Positive rho means that the option will increase in value when the interest rate increases and decreases when the interest rates decrease. Negative rho means that the option will decrease in value when the interest rate increases and increases when the interest rate decreases. Long calls and short puts have positive rho. Short calls and long puts have negative rho.