What does Rho measure in the context of options?

Rho measures the sensitivity of an option's price to changes in interest rates. It represents the amount by which the price of an option is expected to change for a 1% change in interest rates. Understanding Rho is pivotal for traders who want to assess how varying interest rates can impact the value of their options positions, particularly in environments where interest rates are volatile or are expected to change.

In the context of options trading, Rho helps traders develop strategies that account for both the time horizon of their trades and the influence of prevailing economic conditions such as interest rate movements. Hence, traders who are aware of Rho can make more informed decisions about managing the risk associated with their options portfolios.