OptionAutomator Options Trading Glossary:

Definition, Examples & Resources:IV Percentile'

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What is IV Percentile in Options Trading ?

IV Percentile
Implied Volatility (IV) Percentile is a measure used to compare the underlying's current IV (as an average of all available options contract pricing) to historic values, which range defaults to the past year. IV Percentile is always given in a range between 0-100 which corresponds to the number of historic values in the time range with an IV lower than the current IV. For example, if the IV Percentile of the underlying is currently 64% then 64% of IV values for the underlying over the past year were less than the current IV. It's important to note the difference between IV Percentile and IV Rank, as these two terms are often confused.  IV Rank tells you at what percentage in the range of lowest to highest IVs the current IV stands while the IV Percentile tells you the percentage of days that historic IV was less than current IV.

How to Use in Your Brutus Options Ranker Strategy

IV Percentile is an important measure which should be included in most Brutus Options Ranker strategies.  Alternatively, IV Rank can also be used.

The criterion helps us understand if the current pricing of options on the underlying (creating IV) is relatively high or low vs. a 52-week range.  Therefore, the target will vary based on the type of option setup we use in our strategy, namely:

  • Net-Short Spreads: We will almost always want to maximize the IV Percentile to ensure we're selling options that are relatively expensive when compared to the past year.
  • Net-Long Spreads: We will look to minimize IV Percentile to ensure we purchase relatively cheap options.

Where to find IV Percentile in the Brutus Options Ranker Criteria Panel

IV Percentile can be found on the Strategy Tree Builder page within the Brutus Options Ranker.  Look at the Criteria List under the Beginner or Volatility Panel.

Video on IV Percentile

Broader Term

  • Implied Volatility
  • Narrower Term

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