IV Rank places a symbol's current implied volatility on a 0–100 scale between its lowest and highest readings over a trailing window — usually one year. It answers the question raw IV cannot: are these options expensive for this stock?
The formula
IV Rank = (current IV − lowest IV) ÷ (highest IV − lowest IV) × 100
If a stock's IV has ranged between 20% and 80% over the past year and sits at 50% today:
(50 − 20) ÷ (80 − 20) × 100 = 50
An IV Rank of 50 — exactly mid-range for this underlying.
Why raw IV is not enough
45% implied volatility means nothing on its own. For a utility it would be extraordinary; for a small-cap biotech ahead of trial data it might be the calmest the options have been all year.
IV Rank normalises against the stock's own history, which makes "expensive" a meaningful word. It also makes readings comparable across tickers: an IV Rank of 80 means the same thing on both names, even though their absolute IVs differ by a factor of three.
Reading it
Common conventions, offered as guidelines rather than rules:
| IV Rank | Reading | Tends to favour |
|---|---|---|
| Above 70 | High | Premium selling — credit spreads, iron condors, covered calls |
| 50–70 | Elevated | Premium selling, more selectively |
| 25–50 | Middling | No strong volatility edge either way |
| Below 25 | Low | Premium buying — long options, debit spreads, calendars |
The logic rests on mean reversion: volatility tends to return toward its average. Sell it when it is stretched high, buy it when it is compressed.
The trap
A high IV Rank is not a reason to sell premium. It is a reason to ask why it is high.
Volatility is usually elevated for a reason: earnings in three days, a pending court ruling, a takeover rumour. Selling that premium is not harvesting a mispricing — it is taking the other side of a known event. Sometimes correct, never free, and the reading tells you nothing about which.
Always check the calendar before acting on an extreme reading.
IV Rank vs IV Percentile
IV Rank uses only the range endpoints, so a single volatility spike compresses every subsequent reading — a stock that touched 200% once in March can show a permanently depressed rank thereafter. IV Percentile counts how many days actually traded below today, which sidesteps the problem.
Read both. When they disagree sharply, an old spike is distorting the rank, and the percentile is the more honest number.