Here's the logic I use to remember Rho's effect on options:
If you have a call you participate in the upside of a stock without putting down your own cash. The ability to keep the cash in your pocket is worth more when interest rates are high and you can invest it in higher yielding investments. Thus, the option is more valuable and more expensive.
For a put option you're participating in the downside. However, instead of buying a put, you could have just decided to short the stock instead and gotten cash immediately. In a high yielding environment, you'd rather have the cash to invest in high yielding investments so the value of paying money to buy an option rather than getting money from a short sale is less appealing. Thus, the put value is less valuable and cheaper.作者: ayodayo 时间: 2011-7-11 15:29
I think the easiest way to remember is through call-put parity relation.
