Rho
For all intents and purposes, rho is of no concern to Kim. In recent years,
interest rate changes have not been a major issue for option traders. In the
Alan Greenspan years of Federal Reserve leadership, changes in the interest
rate were usually announced at the regularly scheduled Federal Open
Market Committee (FOMC) meetings, with but a few exceptions. Ben
Bernanke, likewise, changed interest rates fairly predictably, when he made
any rate changes at all. In these more stable periods, if there is no FOMC
meeting scheduled during the life of the call, it’s unlikely that rates will
change. Even if they do, the rho with 44 days to expiration is only 0.023.
This means that if rates change by a whole percentage point—which is four
times the most common incremental change—the call value will change by
a little more than $0.02. In this case, this is an acceptable risk. With 23 days
to expiration, the ATM 35 call has a rho of only 0.011.