Will a Fed Rate Cut Shake Up Your Options? | #OptionsHandbook EP029
Everyone’s guessing when the Fed will finally cut rates. But how do you know if your options will be affected?
That’s where Rho (ρ) comes in.
📒 In The Options Handbook, the explanation is pretty clear:
▶ What Rho means 💡
Rho tells you how much the option price changes with a 1% interest rate increase. It matters most for long-term options, while short-term traders can mostly ignore it.
▶ When to watch Rho? ⏱️
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Sudden rate cut/hike rumors.
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Around big Fed meetings (like FOMC).
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Trading long-term options (6+ months). The longer the maturity, the stronger the impact.
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During big economic swings—like recessions or fast recoveries.
▶ How to use Rho in practice? 🎯
If you’re expecting a rate cut, long Puts gain value while long Calls shrink. On the other hand, if you’re expecting a rate hike, long Calls benefit while long Puts lose value.
📘 The Options Handbook covers all 5 Greeks—Delta, Theta, Gamma, Vega, and Rho—in a clear, beginner-friendly way. Now available in the Tiger Coin Center! 🐯
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- extractoi·2025-08-22Great insights on Rho! Understanding it can really help navigate those market swings effectively.LikeReport