Rho
The sensitivity of an option's price to a 1-percentage-point change in the risk-free interest rate.
Formula
ρ = ∂V / ∂r (change in option value per 1% change in risk-free rate)
Rho measures the impact of interest rate changes on an option's price. A call with rho of 0.05 gains $5 per contract for a 1% rise in rates; puts have negative rho.
For short-dated equity options, rho is the least significant of the main Greeks — a 25 basis point rate move barely nudges a 30-day option's value. Rho becomes more meaningful for long-dated options (LEAPS) and interest-rate derivatives where rate sensitivity is the core driver.
Related Terms
Delta
The rate of change in an option's price for a $1 move in the underlying. Ranges from 0 to 1 for calls and −1 to 0 for puts.
IntermediateOptions Contract
A contract giving the buyer the right — but not the obligation — to buy or sell an underlying asset at a set price before or on expiration.
BeginnerThe Greeks
The collective name for the sensitivity measures — delta, gamma, theta, vega, rho — that describe how an option's price responds to changes in market variables.
IntermediateVega
The sensitivity of an option's price to a 1-percentage-point change in implied volatility.
Advanced