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what is the correct rate to input on the option chains when asked for the current risk free interest rate?
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Jeddins,
The default value in eSignal for this field is 2. The Black-Scholes Method is a fairly complex calculation, so you may want to read through some articles regarding this method to obtain some different figures. Generally speaking, the risk-free rate should reflect the short term Treasury rate.
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Jeddins,
Since most options I trade are less than 3 months I use the 13wk T-Bill rate which can be found in real time using $IRX. Currently at 2.152. To be 100% accurate you would want to use the risk free rate that most closely approximated the time til expiration. i.e. for a front month option use the 30 day rate ( I don't remember the symbol though) or for a leap maybe the 1yr rate. Also, if you want more control of the calculations there is a free Black Scholes calculator that is an Excel pluggin at www.gregalton.com that works very nicely with the sigtools pluggin for real time analysis.Comment
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