Dictionary

IV rank and IV percentile

Where current implied volatility sits relative to its own range over the past year, so you can tell whether options are cheap or expensive for that asset.

IV rank = (current IV - 52-week low IV) / (52-week high IV - 52-week low IV), from 0 to 100. IV percentile is the share of days in the past year with IV below today's level. Both answer the same question with different sensitivities to outliers.

Premium sellers look for high IV rank (options expensive); buyers look for low IV rank. Neither guarantees anything; a high rank can go higher.

Example: a stock's IV ranged from 20% to 60% over the last year and is currently 50%. IV rank = (50 - 20) / (60 - 20) = 75.

Related: implied-volatility, iv-crush, credit-spread, vega

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