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IV percentile

The share of days over the past year on which implied volatility was lower than today's reading; a distribution-aware alternative to IV rank.

iv-rank compares today's level to the one-year high and low, so a single spike distorts it for twelve months. IV percentile counts days instead, which makes it robust to outliers and a better description of how unusual current pricing really is.

The two can disagree sharply, and when they do the percentile is generally the more useful number. Neither says anything about whether options are expensive relative to what will actually be delivered — that is the job of implied-vs-realized.

Example: XYZ implied volatility spiked to 80% once last year and has otherwise lived between 18% and 28%. Today it is 26%. IV rank reads 13 — apparently cheap. IV percentile reads 78 — expensive relative to nearly every day of the year. The percentile is right.

Related: iv-rank, volatility-cone, implied-vs-realized, implied-volatility

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