![iv rank thinkorswim iv rank thinkorswim](https://i.ytimg.com/vi/sgHJeTu353g/mqdefault.jpg)
But what is a high value? I know from some options traders that they are selling options only when the IV Rank of a stock hits the value of 50% or higher. In theory, you should sell options when the implied volatility rank shows high values. When to sell options by regarding the IV rank?
![iv rank thinkorswim iv rank thinkorswim](https://snoopy-alien.com/wp-content/uploads/2020/11/apple_impl_vola_2.jpg)
More about the brokers you will find at the end of this article. But if you have the right broker, you will get this figure already calculated so you don’t need to calculate it manually: Source: Trader Work Station
#Iv rank thinkorswim manual#
This was the manual calculation of the IV Rank, folks. But what does it mean? This means if you would draw a vertical line between the highest value of 90% and the lowest value of 17%, the current volatility of 40% would be located at the level of 31% along this line: So in our case, we have got an IV Rank of 31% for the Apple stock. The value of 0.31 corresponds with a percentage value of 31%. IV Rank = (Current implied volatility – 52 Week Implied Volatility Low) / (52 Week Implied Volatility High – 52 Week Implied Volatility Low) To do this, we need to do a calculation, and the formula for this is: In the next step we need to find out, where is the current implied volatility of 40% located between the lowest value of 17% and the highest value of 90%. And if you remember, we have a current implied volatility of about 40%. The highest value in the past 52 weeks was about 90% in March. Within these 52 weeks we look for the lowest value and for the highest value of the implied volatility, and we see that the lowest value was about 17% in November. In the chart you see the last 52 weeks of the Apple chart.
![iv rank thinkorswim iv rank thinkorswim](https://i.ytimg.com/vi/dH3uOnrLD6Y/mqdefault.jpg)
#Iv rank thinkorswim how to#
Now let’s check how to use the implied volatility rank. To make this theoretical stuff more usable, let’s check the next section and take a look at an example. Therefore, with this metric, you will get a much better evaluation if it’s worth selling an option, and that’s the advantage of the implied volatility rank.
![iv rank thinkorswim iv rank thinkorswim](https://i.ytimg.com/vi/3CQ9Qy_WO9Y/maxresdefault.jpg)
In the chart below we see the chart of Apple with the graph of the implied volatility which has a value of about 40%.īut the question is: is the value of 40% high enough and is it worth to sell options on Apple? Because when you take a closer look at the graph of Apple’s implied volatility, you will see that it was much higher in March which was during the Corona crash of 2020:Īnd here is the answer for the question “what is the IV rank”: the implied volatility rank is a metric which uses the actual implied volatility with past implied volatility helping to determine whether the current implied volatility is high or low. Let’s take a stock which everyone knows, for example, Apple. To answer this question, it would be the best when you take a look on the chart. And here comes a solution which is called the Implied Volatility Rank or just the IV Rank. But this would apply just to one stock and not to every stock or commodity. Maybe you would be indeed able to do this when you observe a stock for a longer period of time. When you take a random stock and take a look at its implied volatility, would you be able to determine whether it’s high or low, especially compared with the volatility of the past? Actually, you wouldn’t. But using the implied volatility as a naked figure has a weak spot. The higher the implied volatility the higher would be the price of an option. One of the most important data for an options trader is the implied volatility.