Volatility Metrics (IVR, IV%, IVx, HV)

Volatility metrics play a vital role in many traders' day-to-day operations. Below, you can find information on all of our available volatility metrics, as well as information how you can implement these values into your trading. 

IV Rank

IV rank gauges the current level of IV relative to the range of IVs over the past 52-weeks. For example, if XYZ has had an IV between 30 and 60 over the past year and IV is currently at 45, XYZ would have an IV rank of 50% (IV Rank = (45-30) / (60-30)= 50%). You can find IV Rank on the top header of the desktop platform, or you can add it as a  positions/watchlist tab column. You can find instructions on adding IV Rank to your positions and watchlist tab here

IV Rank = (current IV - 52 week IV low) / (52 week IV high - 52 week IV low)

Animation of IV Rank location on the desktop platform

Wanna see IV Rank on your chart? See this link here for instructions. 

IV Percentile

IV percentile calculates the percentage of days in the past 52-weeks in which IV was lower than the current value. For example, an IV percentile of 80% means that 80% of the days in the past 52-weeks have had lower levels of IV (IV%= (202 / 252) = 80%). You can find instructions on adding IV Percentile to your positions and watchlist tab here

IV Percentile = (# days when IV was lower than current IV) / 252

Picture of IV Percentile location on the desktop platform

Implied Volatility per Expiration (IVx)

The implied volatility (IVx) metric displayed in the option chain is calculated using a VIX-style calculation. The Cboe calculates the VIX Index using standard SPX options and weekly SPX options. These options are weighted to yield a measure of the expected volatility of the S&P 500 Index. A similar procedure applies to the calculation of IVx for each expiration cycle in the options chain. You can find more details on implied volatility and how to implement it in your trading in this link here. IVx per expiration can be found on the right side of the options chain for each expiration in the desktop platform. IVx on the positions/watchlist tab will default to a 30 days timeframe. 

Picture of trade table with labels pointing to IVx and Expected Move

30-Day Implied Volatility

30-Day Implied volatility (IV) refers to the forecasted magnitude, or one standard deviation (SD) range, of potential movement away from the underlying price in a 30-day period. IV is not a guaranteed metric, but it’s helpful in traders understanding ranges from a statistical perspective to help with risk management, buying power fluctuations, etc. A low implied volatility environment tells us that the market isn’t expecting the stock price to move much from the current price over the next 30 days. Inversely, a high implied volatility environment tells us that the market is expecting large movements from the current stock price over the course of the next 30 days. You can find instructions on adding 30-Day IV, HV, and HV-IV difference to your positions and watchlist tab here

Picture of 30-Day IV, HV, and IV-HV difference location on desktop platform

30-Day Historical Volatility

Historical volatility is a backward-looking metric that measures how far the underlying has deviated from its mean price. Historical volatility is calculated by taking a rolling standard deviation of daily returns. This provides insight into the volatility that an underlying has seen in the past 30 days but is no indication of what level of volatility the underlying is expected to have in the future.

30-Day IV-HV Difference

Implied volatility is a forward-looking metric, whereas historical volatility is a backward-looking metric. Historical volatility can serve as a fixed point of reference, while fluctuations in implied volatility reflect the relative value of an option's premium. For example, when HV and IV closely match, options premiums are generally considered fairly valued based on historical norms. The higher the IV-HV 30-day difference, the larger the deviation in expected volatility vs. past levels of volatility. Traders can use these deviations to take advantage of overvalued or undervalued options premiums. For additional information on how to implement this into your trading, visit this link here

HV IV 30 Day Difference = IV - HV 

Picture of 30-Day IV-HV difference calculation