Just think about the Red Hot Chili Peppers
(RH.C.P) RHo Call Positive (long call has positive rho.)
and just remember that long put has negative RHo
Not even needed…once you know one direct, the rest is common sense…
Calls are positively correlated with interest rates…
this means, interest rates go down, call value goes down and put value goes up…and so on
you sure about that?
Yes he is right when interest rate goes up value of call goes up
What about when the yield curve goes from upward sloping to downward sloping. Interest rates are going down at that point…
You could also think of it as ready hoes (rho) are positive about when you “call” them to hang out
Anyone here ever hear of put/call parity?
It tells you all you need to know.
wow! Good point. As the risk free rate rises it erodes more of the value of the bond payoff and since given put/call parity you’re negative that exposure the value of the call rises!!
why didn’t I think of that?
Don’t get me started.
Glad to help.