share_log

Meet the Greeks - Vega, Rho

Moomoo News ·  Mar 12, 2021 15:38  · Exclusive

By Melody

We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics' articles, you should be able to understand options and how to utilize options to either profit or protect your stock. 

This is the third part of "Meet the Greeks" if you are new to this, please click here: DeltaGamma, Theta to catch up first!

Vega

Vega is the amount call and put prices will change, in theory, for a corresponding one-point change in implied volatility. 

Vega does not have any effect on the intrinsic value of options; it only affects the "time value" of an option's price.

Normally, when implied volatility increases, the value of options will increase. This is because implied volatility going up suggests an increased range of potential movement for the stock.

Rho

Rho is the amount an option value will change in theory based on a 1% change in interest rates.

Rho is not as often talked about as the rest of the family. 

For now, what we need to keep in mind is that if we are only trading shorter-term options, changing interest rates should not be affecting the value of your options much. But if you are trading longer-term options (what we call leaps), Rho might be one thing that we need to consider.

50.pngPlease stay with us for more on options basics!

If there is anything that you didn't understand in today's Options Basics article, simply leave a comment below and we will try to explain more to you!

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
50
Comment Comment 3 · Views 17.4k

Comment(3)

  • user-avatar

    awesome

    Jul 20, 2021 16:23
  • user-avatar

    My math degree is paying off!!!

    Oct 8, 2021 22:40
  • user-avatar

    newbie here, does the information on greeks value always the same between broker/dealer? where this greeks value coming from?

    Nov 4, 2021 15:52

Recommended

Write a comment
3