IV Rank

IV Rank is one of the most commonly used metrics for evaluating whether options are cheap or expensive. It takes the current implied volatility and places it within the context of the past year's range. The formula is straightforward: (Current IV - 52-Week Low IV) / (52-Week High IV - 52-Week Low IV). An IV Rank of 80% means current IV is 80% of the way from its annual low to its annual high.

This context is essential because raw IV numbers are meaningless without comparison. A stock with 40% IV might seem high, but if its 52-week range is 30% to 80%, that 40% translates to an IV Rank of just 12.5% — options are actually very cheap for this stock. Conversely, a utility stock at 20% IV with a range of 10% to 25% has an IV Rank of 66.7% — options are relatively expensive for that name.

Traders typically use IV Rank to decide strategy direction. When IV Rank is above 50-60%, conditions favor selling premium because IV is likely to revert toward the mean. When IV Rank is below 20-30%, options are cheap relative to history, and buying strategies may offer better value. Options Pilot incorporates IV Rank as one of several checks within the Value pillar to give you a complete picture of options pricing.