IV Rank & IV Percentile
Use IV Rank and IV Percentile to determine whether options are cheap or expensive
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IV Rank & IV Percentile
Implied volatility of 30% on AAPL — is that high or low? You cannot answer that without context. IV Rank and IV Percentile give you that context. They tell you where current IV sits relative to the stock's own history.
Why Raw IV Is Not Enough
AAPL typically has IV between 20% and 40%. An IV of 30% is in the middle of its range. But TSLA swings between 35% and 90%. An IV of 30% on TSLA would be extremely low.
Comparing raw IV across stocks is meaningless. You need to compare each stock's IV to its own history. That is what IV Rank and IV Percentile do.
IV Rank (IVR)
IV Rank measures where current IV falls between the 52-week high and low.
Formula: IVR = (Current IV - 52-week Low IV) / (52-week High IV - 52-week Low IV) x 100
Example: AAPL's 52-week IV range is 18% to 42%. Current IV is 30%.
IVR = (30 - 18) / (42 - 18) x 100 = 12/24 x 100 = 50
An IVR of 50 means current IV is exactly at the midpoint of its annual range.
Another example: MSFT's IV range is 20% to 55%. Current IV is 25%.
IVR = (25 - 20) / (55 - 20) x 100 = 5/35 x 100 = 14.3
An IVR of 14 means IV is near the bottom of its range. Options are relatively cheap.
IV Percentile (IVP)
IV Percentile measures the percentage of days in the past year that IV was below the current level.
Example: AAPL's current IV is 30%. Over the past 252 trading days, IV was below 30% on 180 of those days.
IVP = 180/252 x 100 = 71.4%
An IVP of 71% means IV has been lower than today's level 71% of the time over the past year. Current IV is in the upper range.
IVR vs. IVP: Which Is Better?
They often tell the same story, but not always. IVR can be distorted by extreme outliers.
Say AMZN had one day where IV spiked to 80% (earnings panic) but normally trades between 25% and 40%. Current IV is 35%.
IVR = (35 - 25) / (80 - 25) x 100 = 18.2 — looks low! IVP might be 65% — because IV was below 35% most of the year.
The IVR is misleadingly low because of that one spike to 80%. IVP gives a more accurate picture of where IV normally sits.
Best practice: Use both. If both are high, IV is elevated. If both are low, IV is cheap. If they disagree, investigate why.
How to Use IVR/IVP in Trading
This is the practical part that directly impacts your trade selection:
IVR/IVP above 50: Sell premium. Options are expensive relative to history. Use credit spreads, iron condors, short strangles (if you have the experience), and other premium-selling strategies.
IVR/IVP below 30: Buy premium. Options are cheap. Use debit spreads, long straddles/strangles, and calendars that benefit from IV expansion.
IVR/IVP between 30 and 50: Neutral zone. Either approach works. Lean toward credit strategies if you have a neutral or mild directional view. Use debit strategies if you have strong conviction.
A Decision Matrix
| IVR | Bullish | Bearish | Neutral |
|---|---|---|---|
| High (>50) | Bull put spread (credit) | Bear call spread (credit) | Iron condor / Iron butterfly |
| Low (<30) | Bull call spread (debit) | Bear put spread (debit) | Calendar spread / Long straddle |
| Mid (30-50) | Either | Either | Lean credit |
This table should be taped to your monitor. It removes the guesswork from strategy selection.
Where to Find IVR and IVP
Most major platforms display these metrics:
- TastyTrade: Shows IVR prominently on every option chain
- ThinkOrSwim: Available through custom studies or the "Today's Options Statistics" section
- OptionsNest tools: We display IVR and IVP for every ticker in our screener
If your platform does not show them, a quick check is to look at the 1-year IV chart. If current IV is visually near the top of the chart, it is high rank. Near the bottom, low rank.
Practical Example
You want to make a bullish trade on DIS at $110.
Step 1: Check IVR. It is 72. IVP is 68. Both high. Step 2: Because IV is elevated, choose a credit strategy: bull put spread. Step 3: Sell the $100/$95 put spread for $1.50 credit. Step 4: IV is your friend now. If IV drops, the options you sold lose value faster. Combined with time decay and bullish direction, you have three tailwinds.
Compare this to buying a bull call spread when IVR is 72. You would be buying expensive options. If IV drops (which it tends to do from high levels), your long call loses value even if the stock goes up. You are fighting the volatility headwind.
Common Misunderstandings
"High IV means the stock will drop." No. IV measures expected movement, not direction. High IV means big moves are expected, not which direction.
"Low IVR means options are bad." Low IVR means options are cheap. That can be great for buyers. It just means selling premium is less rewarding.
"IVR of 50 is average." Technically yes, but most stocks spend the majority of time with IVR below 40, spiking above 50 only during events. An IVR of 50 is often already a good setup for premium selling.
IV Rank and IV Percentile are the compass that tells you whether to buy or sell options. Combined with your directional thesis, they complete your trade selection framework. Now let us put everything together in a comprehensive trade plan.