What Is the Significance of the Rho Greek in DeFi Options That Reference Stablecoins?

Rho measures an option's sensitivity to changes in the risk-free interest rate. For DeFi options referencing stablecoins, Rho becomes significant because the "risk-free rate" is often proxied by stablecoin lending rates in protocols.

As these lending rates can be volatile and change based on supply and demand, a DAO with long-term options positions needs to monitor Rho. A high Rho indicates the option's value is highly sensitive to changes in the underlying DeFi lending rates.