IV rank places a stock's current implied volatility inside its own range over the past year, on a scale of 0 to 100. A rank of 84 means today's IV sits at the 84th percentile of everything that stock has shown in a year. It answers only one question: is this option premium high or low for this particular stock?
The common form is a percentile: count how many of the past year's daily implied volatility readings sit below today's reading, and express that as a percentage. Some platforms instead use the min-max form, where rank = (current IV - 52-week low) / (52-week high - 52-week low). The percentile form is more robust, because a single extreme spike day distorts the min-max denominator for a full year afterward.
Options Scanner maintains a true observation store for IV rank: it records each day's at-the-money IV and ranks today against those actual observations, labeling the number differently when only a realized-volatility proxy is available.
Option premium is the price of volatility. The same 30-delta credit spread pays meaningfully more when IV is in the top decile of its range than in the bottom decile, while the width, and therefore the worst case, stays the same. Premium-selling disciplines therefore often include an IV rank floor among their entry criteria, and premium-buying disciplines an IV rank ceiling: paying up for options when volatility is already rich is a headwind that has to be overcome by the directional move.
IV rank is self-referential. It compares a stock only to its own history, which produces two classic failure modes:
Because of the first failure mode, a rank number is most trustworthy when cross-checked against a measure of the premium itself, such as the net volatility risk premium, which compares implied volatility to the stock's realized movement. When the two disagree, the premium measure is the one that describes what a seller actually collects.
No. IV percentile counts the share of days in the past year with implied volatility below today's reading, while the min-max form of IV rank scales today's IV between the 52-week low and high. The two can disagree sharply after a single extreme spike, because the min-max form keeps comparing every later reading against that one outlier. Many platforms label the percentile form as IV rank, so the label alone does not settle which formula is behind a number.
There is no universal threshold. Premium-selling rule sets commonly use floors somewhere between 30 and 50, and premium-buying rule sets often use ceilings, but any cutoff is a filter the trader chooses and owns. A reading in the top decile of a stock's own year is high by definition, though the failure modes described above explain why a high rank does not always mean rich premium.
The arithmetic is identical, but index and broad-ETF volatility mean-reverts more predictably than single-stock volatility, which can jump on company news and stay elevated. Single-stock rank readings around earnings are the least stable, because the scheduled event inflates and then deflates implied volatility on a known date.