Rho Glossary
Plain-English definitions for common terms related to rho, options pricing, and interest-rate sensitivity.
Rho
An option Greek that estimates how much an option's value may change when interest rates change.
Basis point
One one-hundredth of a percentage point. A 100 basis-point move equals 1.00 percentage point.
Option Greeks
Sensitivity measures used to estimate how option values may respond to different factors.
Delta
An estimate of how much an option's price may change for a one-point move in the underlying asset.
Gamma
An estimate of how much delta may change as the underlying price changes.
Theta
An estimate of how much an option's value may change as time passes, all else equal.
Vega
An estimate of how much an option's price may change when implied volatility changes.
Interest-rate sensitivity
The degree to which an instrument's value may change when interest rates move.
Present value
The current value of a future amount of money after discounting for time and interest rates.
Call option
An option contract that gives the holder the right, but not the obligation, to buy the underlying asset at a specified strike price.
Put option
An option contract that gives the holder the right, but not the obligation, to sell the underlying asset at a specified strike price.
LEAPS
Longer-dated equity options, often with expirations more than one year away.
Contract multiplier
The number of underlying shares or units represented by one options contract.