Option Greeks - Rho

The rho of an option is the sensitivity to the risk free interest rate.

\[ \rho = \frac{ \partial V } { \partial r } \]

The effect of Rho arises from considering cash flows.

The rho of a call is positive, and the rho of a put is negative.

Rho is larger (in absolute value) for options that are in the money, and decrease as the option moves out of the money.

Rho is larger with a greater time to expiry

Rho is often considered least important, because option traders tend to focus on options that are close to expiry, or are out of the money. Also, from 2009 - 2015, interest rates are artificially held steady by the US government as a response to the 2008 financial crisis.