Guides

IV rank and IV percentile

An implied volatility of 40% means little on its own: it is high for a utility and low for a biotech. IV rank and IV percentile answer the question that matters, whether a stock's options are expensive against their own past.

Implied volatility, one number a day

Every option price carries an implied volatility (IV): the volatility that, put into the pricing model, gives the price the market is paying. To compare one day with another you need one number a day, so the usual choice is the at-the-money IV, taken from the strikes nearest the stock price. Options Meerkat uses the 30-day at-the-money IV: the IV at the money of the expiries either side of 30 days, interpolated to exactly 30 days, so the number does not jump each time an expiry rolls off.

IV rank: where today sits in the range

IV rank places today's IV between the lowest and the highest IV of the period:

IV rank = (IV today − lowest IV) ÷ (highest IV − lowest IV)

At 0 the IV is at its low, at 100 at its high. If a stock's IV ranged from 20% to 60% over the period and is 30% today, its IV rank is (30 − 20) ÷ (60 − 20) = 25.

IV percentile: how many days were lower

IV percentile counts the days whose IV was below today's:

IV percentile = days with a lower IV ÷ all days

With the same stock, if 200 of 250 days had an IV under 30%, the IV percentile is 80, even though the IV rank is only 25.

Why they disagree

IV rank uses only two days of the period, the highest and the lowest. One spike, a crash or an earnings report, stretches the range and pushes the rank down for months afterwards. IV percentile uses every day, so a single spike moves it little. In the example the stock spent most of the year in the low 20s, spiked once to 60, and now sits at 30: high for this stock on most days (percentile 80), but far from the spike (rank 25).

Read together, they tell more than either alone:

• Both high: options are expensive by any measure. Premium sellers look here; it is also where the market expects something.
• Percentile high, rank low: IV is above its usual level but well under an old spike. Usually the percentile is the better guide.
• Both low: options are cheap against their past. Buying premium costs less, though IV can stay low for a long time.

What makes IV high

A high reading is not a signal on its own. The most common reason is a known event: implied volatility climbs into an earnings report and falls the day after (the IV crush). Check the calendar before reading a high percentile as fear, and compare the IV with what the stock is actually moving, its realized volatility.

In Options Meerkat

The dashboard shows both for every symbol on the list: pctile, the IV percentile, and ivr, the IV rank, each from 0 to 100, red at 80 and above and green at 20 and below. The list sorts by percentile by default, so the richest options come first. Both are measured against the snapshots the server has stored for that symbol, one a day, and need at least 20 earlier days, about a month; until then the column shows how far along it is (8/20). The detail page's IV history (h) draws the whole series with the 20-day realized volatility under it, and an alert rule can fire when the percentile crosses a level.