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    Put another way, at the beginning of a day period, IV is predicted for the equity's move over the course of the next month.

    However, when looking back and comparing the actual volatility after that day period it is nearly always lower thus IV is overestimated. Thus stocks are less volatile than predicted!

    option rank

    Therefore, the value of options contracts is nearly always high relative to what the actual stock move reflects. This overestimation is where options traders can take advantage and sell overpriced options to maximize profits and probability of success over the long-term.

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    This is where IV Rank comes into play and how this is the most critical variable in options trading and its success over the long-term. IV Rank is a measure of current implied volatility against the historical implied volatility range IV low - IV high over a one-year period.

    option rank

    We need to compare the current IV value to this range to understand how the current IV ranks in relation to its historical IV range. When IV Rank approaches a value of greater than 50 then option sellers can use option rank to their advantage to take in rich options premium with the expectation that this implied volatility will decrease. Any value above the 50 threshold is where the overestimation of actual volatility thrives and options sellers can take in rich premiums with the expectation that IV will fall thus the option itself will fall in value.

    Rich premiums can be paid out to option sellers with the option rank that volatility will revert to its mean.

    option rank

    Allowing the option to decrease in value and expire worthless at expiration even if the underlying stock moves up, sideways or down without breaking through the strike price in a high probability manner. Selling options in option rank high IV Rank situations serve as a two-fold benefit since time premium is always evaporating and IV will likely revert to its mean and fall. Even if the stock moves up, down or trades sideways without breaking through the strike, the option will be profitable as time and IV fall.

    option rank

    The high IV Rank provides rich premium and as the option life-cycle unfolds and this volatility decreases, the option time value implodes and the option decreases in value allowing profits to be realized earlier in the life-cycle without waiting until expiration of the contract. Leading to consistent income generation in a high-probability manner without guessing which way the stock will move.

    Implied volatility rank or IV rank for short is a concept that is coming to the forefront of the options trading industry. Many options trader knows what implied volatility is if not, check out the learn page here and how it relates to the pricing of options, but few understand what IV rank is. IV rank is a measure that brings relativity to implied volatility.

    Option rank allow one to dictate his probability of success and thus profit without estimating what direction the market will move. Options are a bet on where the stock won't go, not where it will go.

    Home Features Rank order What is a rank order question? A rank order question lets respondents order answer options as per their preference. Rank order scale is defined as a survey question typethat allows respondents to rearrange and rank multiple-choice options in a specific order. Rank order survey questions are close-ended questions that allow respondents to evaluate multiple row items in relation to one column item or a question in a ranking survey and then rank the row items.