Lesson

Rho rate risk | Options Educator

Learn how rate shifts tilt call and put pricing over long horizons.

What you'll practice

  • Rates rise by 1 point. Predict which way each price moves: the call (option A) and the put (option B).
  • Shorten the call (option A) toward a month to expiry, until its rho per 1% is about $0.040, within $0.010.

In this lesson

Rho: The Rate Risk Greek

  • Rho tracks sensitivity to interest rates
  • Calls benefit from rising rates
  • Puts lose value when rates rise
  • Rho is quoted per share for a 1-point rate move

When Rho Matters

  • Rho matters most on long-dated options
  • Rate spikes can move option prices
  • Calls gain, puts lose when rates rise
  • Rho is a secondary Greek but still matters

Using Rho in Practice

  • Position rho = contracts × 100 × rho per share
  • A long call and a long put at the same strike nearly cancel each other's rho
  • Estimate the move with rho, then reprice the option for a large rate change

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