Lesson 6 of 6 · Options 101
IV rank
IV rank puts the number in context.
IV rank measures where current implied volatility sits versus its 52-week range. A rank of 0 means IV is at the lowest point of the past year. A rank of 100 means it's at the highest. It answers one question: are options cheap or expensive for this stock right now?
Rank 78: options are expensive.
The needle sits in the expensive zone above 70. Current IV is near the top of its one-year range. Buyers pay more than usual for the same strike and expiry. Sellers collect inflated premium.
This one is an animated diagram in the app. See it in Vero.
Rank vs. percentile: not the same thing.
IV rank uses the 52-week high and low as endpoints. IV percentile counts how many days over the past year IV was lower than today. Example: IV is 40%, the 52-week range is 20-60%. IV rank = (40-20)/(60-20) = 50. If IV was below 40% on 80% of those days, IV percentile = 80. Same stock, different numbers. Rank is more common on retail platforms.
A stock has IV rank of 12. Which approach makes more sense on the pricing?
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B. Buying a call when premium is historically cheap. IV rank of 12 means options are near their cheapest in a year. Buyers pay below-average for the expected move. Sellers collect less than usual, so buying makes more sense on pricing alone.