Short options
What is Implied Volatility Rank (IV Rank) and why is it essential for filtering short options setups?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
IV Rank measures where current implied volatility sits relative to its highest and lowest levels over a past period, typically one year, helping traders identify whether premiums are relatively expensive or cheap before selling options.
How it works
A high IV Rank suggests current volatility is near its yearly extreme, which short-premium traders often use as one factor among several when screening potential income trades.
An example
A stock with an IV Rank of 85 is trading near its one-year volatility high, which some traders use as a signal to consider selling premium rather than buying it.
Risk & limitations
Cboe and OIC materials note IV Rank is a historical, backward-looking statistic that does not predict whether volatility will rise or fall going forward.
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.