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Rho

The Greeks describe an option's sensitivity to changes in different factors. Here we use ordinary stock options, with other pricing inputs held fixed.

Rho

Interest-rate sensitivity

How does the option value change when the risk-free interest rate used in pricing rises by one percentage point?

When rates rise, calls generally become more expensive and puts cheaper. The effect is usually larger with more time remaining, and smaller near expiration.

View example

For example, with Rho = 0.04 and other factors unchanged:

  • The interest rate rises 4% → 5%
  • The option price rises by about 0.04 yuan

These are local estimates. Option-price amounts are per share; multiply by the contract multiplier for one contract.

For the same option and quantity, a short position has the opposite Greek signs to a long position.

Several factors can change together: a call can lose value even as the stock rises if time decay or falling implied volatility outweighs the gain from the stock move.