Learn About Options Greeks: What is Rho?

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VIDEO SUMMARY:

TradeKing Sr. Options Analyst Brian Overby talks today about rho, the “Greek” options traders uses to estimate how changes in interest rates are likely to impact an option’s price.

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PLEASE READ THESE DISCLAIMERS:

The Greeks represent the consensus of the marketplace as to how the option will react to changes in certain variables associated with the pricing of an option contract.

While Rho represents the consensus of the marketplace as to the amount a theoretical option’s price will change for a corresponding one-unit (percent) change in the interest rate used to price the option contract there is no guarantee that this forecast will be correct.

While Delta represents the consensus of the marketplace as to the theoretical price movement of the option relative to the underlying security there is no guarantee that either of these forecasts will be correct.

While Vega represents the consensus of the marketplace as to the amount a theoretical option’s price will change for a corresponding one-unit (point) change the implied volatility of the option contract there is no guarantee that this forecast will be correct.

While Theta represents the consensus of the marketplace as to the amount a theoretical option’s price will change for a corresponding one-unit (day) change in the days to expiration of the option contract there is no guarantee that this forecast will be correct.

Online trading has inherent risks due to system response and access times that vary due to market conditions, system performance and other factors. An investor should understand these and additional risks before trading.