Rho P
Rho is arguably the least significant of the five main Greeks (sensitivities), and as such we’ll only spend a little time on it. Rho is positive for stock call options and negative for some other assets such as call options on futures. This means that for call stock options, a higher risk-free interest rate translates to higher call pricing. The sensitivity is not nearly as pronounced as with the other Greeks and, as such, rho is not overly significant for our purposes.
Call rho is always positive, signifying that higher interest rates will improve a call’s value. Put rho is always negative, signifying that higher interest rates will hurt a put’s value.
Chart 6.5.1. Long Call rho profile.
Chart 6.5.2. Long Put rho profile.
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