What is rho in options?
In one line: Rho is the options "Greek" that estimates how much an option's price changes when interest rates rise or fall by 1 percentage point.
A simple example
Options have "Greeks." Each one tells you how the price reacts to one thing. Delta covers price moves. Theta covers time. Rho covers interest rates.
Say a Call option costs $5.00 and has a rho of 0.08. If interest rates rise by 1 percentage point, the call should be worth about $5.08. If rates fall 1 point, about $4.92.
Puts work the other way. A put with a rho of −0.06 loses about $0.06 when rates rise 1 point.
Real prices also move with the stock, time and volatility at the same moment. Rho only isolates the rate part.
Why it matters
For most short-term trades, rho barely matters. Rates rarely jump a full point in a few days, and options that expire soon have tiny rho.
It matters more for options that run a year or longer. The longer the time, the more rates feed into the price. That's why longer-dated options can shift a little around a FOMC decision even when the stock sits still.
Our guide on how interest rates affect stocks shows the bigger picture.
A common mistake
Ignoring rho on long-dated options, or worrying about it on short ones. On a one-week option, rho is close to zero. Watch delta and theta instead. On a two-year option, rho is big enough to notice.
Rho is quoted per 1 percentage point, which is 100 basis points. A typical Fed move is 0.25 points, so expect about a quarter of rho.
Questions
Is rho positive for calls?
Yes, usually. Higher rates tend to lift call prices and lower put prices, so calls have positive rho and puts negative rho.
Why is rho the least-watched Greek?
Rates move slowly compared with stock prices, time and volatility. For short-dated options its effect is tiny.
Does rho change over time?
Yes. It shrinks as expiration gets closer, because there's less time for interest to matter.
Want the next step? We'll walk you through it.
Four free lessons by email, one every few days — each with a 10-minute exercise on a real chart.
Send Me the Free Lessons 4 short emails · No spam · Unsubscribe anytimeOr see the whole method, step by step:
See What’s Inside the Course Try everything free first. Decide when you're ready. · Open the free chart tool (works in the TradingView phone app)One chart idea a day, in plain English. Follow along: