The net volatility risk premium (NVRP) measures how much more the options market charges for volatility than the stock has actually delivered: (ATM implied volatility minus realized volatility) divided by realized volatility. A positive NVRP means options are priced above the stock's recent movement; a negative NVRP means the market is charging less than the stock has been moving.
Implied volatility is the market's forward price for movement; realized volatility (for example, 20-day historical volatility) is the movement that actually happened. Their gap is the volatility risk premium, the extra amount option buyers persistently pay for protection and convexity. Normalizing the gap by realized volatility makes it comparable across quiet and wild stocks: NVRP = (ATM IV - HV20) / HV20.
Options Scanner buckets the reading three ways: PREMIUM at 0.10 and above, where implied prices movement at least 10% above what the stock has delivered; FAIR between 0 and 0.10; and CHEAP_VOL below 0, where options cost less than recent movement.
IV rank is self-referential: it locates today's IV inside the stock's own year of history. NVRP measures the premium itself, today, against the tape. Right after a volatility spike, rank reads high because the spike stretched the one-year window, while the actual sellable premium may already be thin; NVRP catches that, because it compares against current realized movement rather than a year of history. When the two disagree, the NVRP reading describes what a premium seller is actually being paid. This is exactly why the rules engine in Options Scanner uses an NVRP floor, rather than an IV rank floor, as the primary volatility gate on credit-spread entries: the IV being sold has to be at least as high as the stock's realized movement matched to the trade's timeframe.
Realized volatility is backward-looking. Ahead of a scheduled event such as earnings, implied volatility rises for a good reason, and a high NVRP partly reflects known future risk rather than pure premium. That is why event screens (an earnings blackout, a macro calendar check) sit alongside the NVRP gate in a screening discipline rather than being replaced by it. NVRP also inherits the noise of its realized-volatility window: a single crash day inside the 20-day window depresses the reading for a month.
Across large liquid names, implied volatility usually sits somewhat above realized volatility, so mildly positive readings are the norm rather than the exception. Options Scanner buckets readings at 0.10 and above as PREMIUM, 0 to 0.10 as FAIR, and below 0 as CHEAP_VOL, which frames each number against that persistent baseline.
Yes. A negative reading means options are priced below the movement the stock has recently delivered, which often happens when realized volatility surges faster than the options market reprices. It describes pricing, not a prediction: realized volatility can fall back just as quickly.
NVRP. IV rank locates today's implied volatility inside the stock's own year, while NVRP compares the price of volatility to delivered movement, which is what a premium seller actually collects. A high rank with a thin NVRP usually marks the after-spike distortion where the lookback window, not today's premium, is doing the talking.