Long calls & puts
How do I avoid buying options during periods of overextended Implied Volatility Percentile (IVP)?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Checking IV Rank or IV Percentile before buying helps traders avoid paying inflated premiums when implied volatility is near its own one-year highs, since elevated IV increases the cost of long options and the risk of a subsequent volatility decline.
How it works
When IVP is high, extrinsic value is expensive relative to its historical range, so even a correct directional call can lose value if volatility reverts lower faster than price moves favorably.
An example
A trader might avoid buying calls on a stock with an IV Percentile above 80 ahead of earnings, since a post-event volatility crush could offset directional gains.
Risk & limitations
OIC materials caution that IVP is a historical statistical measure, not a predictor of future volatility direction, and markets can remain volatile longer than expected.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.