IV Rank tells you where today’s implied volatility sits relative to the past year. It’s a range-aware metric that helps decide when to sell premium (high IV Rank) or pay premium (low IV Rank). It does not predict direction; it frames risk.
External references:
• Investopedia — Implied Volatility
• Cboe — Volatility Education
• SEC — Options Disclosure
What is IV Rank?
Definition: where today’s IV lies between its 52-week low and high.
Formula: (Current IV − 52W Low) / (52W High − 52W Low) × 100
Range: 0–100 (cap values outside the band).
Consistent inputs matter (e.g., 30-day ATM IV).
IV Rank vs. IV Percentile
- •IV Rank — uses range only (high/low).
- •IV Percentile — % of days IV was below today (distribution-aware).
We track both: Rank is quick; Percentile gives context when the distribution is skewed.
Why IV Rank matters
- •Strategy selection:
- •High Rank → richer options → defined-risk credit (e.g., vertical credits, iron condors).
- •Low Rank → cheaper options → debits/calendars/diagonals.
- •Greeks planning:
- •High Rank → expect mean-reversion risk → negative vega helps.
- •Low Rank → room for IV expansion → positive vega helps.
- •Catalyst awareness: earnings and events can inflate IV; plan for IV crush.
Worked examples
- •Example A (mid-range): 52W High 80%, Low 20%, Current 50% → Rank = (50−20)/(80−20)×100 = 50.
- •Example B (near lows): High 60%, Low 15%, Current 18% → Rank ≈ 6.7 → debit/long vega ideas.
- •Example C (above high): High 70%, Low 25%, Current 75% → raw 111 → cap at 100.
Quick vega check: option vega = 0.12, IV −10 pts → price ≈ −$1.20, all else equal.
Common mistakes
- •Mixing IV sources (ATM vs blended) → be consistent.
- •Assuming fast mean reversion; high IV can persist.
- •Ignoring realized volatility; sometimes IV is “high” for a reason.
- •Over-shorting premium in high Rank without defined risk.
- •Trading illiquid tickers with wide bid/ask.
- •Forgetting skew — OTM puts/calls carry different IV behavior.
Apply IV Rank in ImpliedOptions
- •Scan candidates by Rank and liquidity in /analysis.
- •Cross-check event risk via Nasdaq Earnings.
- •Structure the trade in /strategy-builder:
- •High Rank → credit spreads/iron condors with defined risk.
- •Low Rank → debit spreads/calendars/diagonals (positive vega).
- •Monitor live tape in /flow to see if institutional flow confirms your thesis.
FAQ
Does IV Rank predict price direction?
No. It frames option pricing context, not bullish/bearish calls.
Which IV should I use for Rank?
Many use 30-day ATM IV; just be consistent across names.
Rank or Percentile — which is better?
They answer different questions. We use both for a fuller picture.