Options and Interest rates

Discussion in 'Options' started by 76132, Jan 10, 2013.

  1. 76132


    I'm confused. I've read conflicting effects of interest rates on option prices.

    Some say as interest rates rise:
    -Puts decrease in value while calls increase in value.

    Others say as interest rates rise:
    -Both puts and calls decrease in value.

    What's the right answer?

    NVM: I think I know the answer.
    -The first statement takes into account the effect of interest rates on the underlying.
    -The second statement assumes that options exist in a vacuum.

    Thus, I would say the first statement is most accurate.
  2. Rho, rho, rho your boat......:cool: