IV Percentile
% of days IV was below current.
Definition
The fraction of trading days in the trailing window (usually 252) where implied volatility was less than or equal to the current IV, expressed as 0-100. Uses the full empirical distribution rather than just the high and low.
Formula
IV_pctile = (# days IVt ≤ IVnow) / N × 100
N is the lookback length in trading days. Robust to single-day spikes, unlike IV rank.
Inputs
IV time seriescurrent IVlookback N
Output
iv_percentile (0-100)
Interpretation
- High (>80): IV is in the top fifth of the year — statistically rich.
- Low (<20): IV is in the bottom fifth — statistically cheap.
- Mid: IV in a typical range; no distributional edge.
API Reference
Endpoint
GET /v1/volatility/{symbol}
Tier
Basic
Response field
iv_percentile
Why IV Percentile Matters for Trading
TL;DR
Percentile answers "how often has vol been this high?" using the entire distribution. More robust than rank when one spike dominates the high-low range.
- What it measures
- The share of trading days in the lookback window that had equal or lower IV than today.
- What it signals
- Whether current vol is statistically rich or cheap versus its own empirical distribution.
- Why we measure it
- IV rank breaks when outliers anchor the 52w high. Percentile uses all 252 days equally.
- Who uses it
- Systematic premium sellers, scanner builders, anyone needing a stable "is vol high?" flag.
How to read IV Percentile
High (>80%)
- Top quintile of trailing year
- Premium-sell bias
- Short strangles, iron condors
- Watch VRP to confirm edge
Good for: premium sellers
Low (<20%)
- Bottom quintile of year
- Long-premium bias
- Calendars, long straddles
- Vol-expansion setup
Good for: long-vol buyers
Mid (20-80%)
- Typical vol regime
- No distributional edge
- Trade direction not vol
- Wait for extreme
Neutral
Rules of thumb
- Prefer percentile over rank when the trailing year had a significant tail event (crash, earnings blowup).
- Use a 252-day window for liquid names; shorten to 63 days for names with regime shifts.
- Always cross-check with realized vol. High percentile with even higher RV means vol may still be cheap.
- Don't sell percentile alone. Combine with VRP and skew to confirm the trade has positive expected value.
- Distribution can drift. A new structural vol regime makes the trailing 252d stale — watch rolling percentile stability.
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