📊 Implied Volatility (IV) Inputs
Volatility Metrics Breakdown
Option Implied Volatility Rank (IVR) Guide
What is IV Rank (IVR)?
IV Rank measures current IV relative to its 52-week low and high. An IV Rank of 80 means current IV is at 80% of its annual range—signifying extremely high option premiums suitable for option selling strategies.
IV Rank vs IV Percentile
IV Rank: Compares current IV to absolute min/max endpoints.
IV Percentile: Measures the percentage of trading days in the past year where IV was lower than current IV.
💡 Pro Hack: Sell Options When IVR > 50
When IVR is above 50, option premiums contain significant fear markup. Option sellers gain a statistical edge from theta decay and volatility crush.
⚡ Buy Options When IVR < 20
When IVR is under 20, options are cheap. Use net debit strategies like Long Calls, Long Puts, or Debit Spreads to minimize time decay loss.
🛡️ Earnings Volatility Crush
IV Rank spikes right before quarterly earnings. Selling credit spreads just before earnings captures rapid premium deflation.
IV Rank Trading Strategy Matrix
| IV Rank (IVR) Level | Option Premium Pricing | Recommended Trading Strategy |
|---|---|---|
| IVR 50 to 100 (High) | Expensive / Overpriced | Iron Condors, Credit Spreads, Covered Calls, Short Straddles |
| IVR 20 to 50 (Moderate) | Neutral / Fairly Priced | Calendar Spreads, Ratio Spreads, Collar Strategies |
| IVR 0 to 20 (Low) | Cheap / Underpriced | Long Calls, Long Puts, Bull/Bear Debit Spreads |
⚠️ 3 Common IV Rank Mistakes
- • Buying Options at High IVR (>70): Buying calls/puts during high IVR subjects your position to severe volatility crush even if direction is correct.
- • Ignoring Delta & Strike Selection: High IVR provides a premium edge, but bad strike selection can still result in losses.
- • Confusing Absolute IV with IV Rank: An absolute IV of 25% might be high for Nifty (IVR 80) but extremely low for a volatile stock like Tata Motors (IVR 10). Always look at IVR!