You're looking at AAPL's options chain. The $230 call expiring in 30 days is paying $3.40. Is that good? Is that bad? You have no idea — because you have no context.
That same $3.40 premium could be exceptional (if AAPL's premiums have been hovering around $2.00 for months) or terrible (if they were $6.00 last week and just collapsed). The dollar amount alone tells you nothing about whether now is a good time to sell.
This is the problem IV Rank solves. It's a single number — 0 to 100 — that tells you where today's premiums sit relative to the past year. It's the most important number in covered call selling, and most retail investors have never heard of it.
What is implied volatility?
Before IV Rank makes sense, you need a 30-second understanding of implied volatility (IV) itself.
Implied volatility is the market's expectation of how much a stock will move in the future. It's baked into every option price. When traders expect big moves — before earnings, during a market selloff, around a product launch — IV goes up, and option premiums get more expensive. When things are calm, IV drops, and premiums shrink.
For covered call sellers, the practical implication is simple: higher IV means you get paid more for the same trade. If AAPL's IV is 35% today versus 20% last month, that same $230 call pays a significantly higher premium. The stock hasn't changed — the market's expectation of movement has.
The problem is that raw IV numbers are useless for comparison. AAPL's IV of 25% and TSLA's IV of 55% don't tell you which stock's premiums are more attractive right now relative to their own history. That's where IV Rank comes in.
What is IV Rank?
IV Rank measures where a stock's current implied volatility sits relative to its own range over the past 52 weeks. It answers one question: compared to its own history, is this stock's IV currently high, low, or somewhere in between?
IV Rank = (Current IV − 52-Week Low IV) ÷ (52-Week High IV − 52-Week Low IV)
Result is expressed as a percentage from 0 to 100
An IV Rank of 70 means current IV is 70% of the way from its yearly low to its yearly high. It doesn't mean IV is at the 70th percentile of all stocks — it means this stock's IV is elevated relative to its own recent history.
Here's a concrete example. Try changing the values to see how IV Rank responds:
Interactive · Try changing the values
Premiums are elevated relative to the past year. This is generally a good time to sell covered calls — you're being compensated above average.
(34.8 − 18) ÷ (42 − 18) = 70.0
This is why IV Rank is more useful than raw IV for covered call sellers. You don't care whether AAPL's IV is 25% or 35% in absolute terms — you care whether 25% is high or low for AAPL. IV Rank answers that instantly.
IV Rank vs. IV Percentile
These two metrics are often confused. They both measure whether IV is historically high or low, but they use different methods.
IV Rank
Where current IV sits in the 52-week range (high minus low).
Sensitive to extremes. A single IV spike to 80% sets the ceiling for the entire year, making all subsequent readings look lower.
IV Percentile
Percentage of days in the past year when IV was lower than today.
More stable. Smooths out one-off spikes because it counts days, not range extremes.
Both are useful. ThetaScout displays IV Rank as the primary metric because it's more intuitive for premium sellers — “how close am I to the yearly high?” is a natural question when you're deciding whether to sell. But the difference is worth understanding: after a major volatility spike, IV Rank can stay artificially low for months because the ceiling was set so high. In those cases, IV Percentile gives a more accurate picture.
Why IV Rank matters for covered calls
This is the section that matters. IV Rank isn't an academic concept — it directly affects how much money you make and whether a trade is worth taking.
High IV Rank means you're getting paid more than usual
When IV Rank is above 50, premiums are elevated relative to the stock's own history. You're collecting above-average income for the same level of risk. This is when covered call sellers have a structural edge — implied volatility tends to mean-revert, so selling when it's high means you're likely to keep more of the premium as IV declines.
Low IV Rank means premiums might not be worth the risk
If IV Rank is 15, you're selling options when premiums are near their yearly low. The risk of your shares getting called away is the same, but your compensation is below average. This is the equivalent of renting out your apartment during the slowest month of the year — same commitment, less income.
IV Rank gives you a “buy signal” for premiums
Just like you wouldn't buy a stock at its all-time high without a reason, you shouldn't sell covered calls when premiums are at their yearly low. IV Rank is the compass. Combine IV Rank above 50 with a stock you want to own, sufficient options liquidity, and no imminent earnings — and you have a high-quality covered call setup.
Practical Example
AAPL's IV Rank is 72 (High). The 30-day $230 call is paying $4.10, which is a 1.8% premium yield — annualizing to roughly 22%.
Three weeks ago, AAPL's IV Rank was 18 (Low). The same trade would have paid $1.90, yielding 0.8% — annualizing to roughly 10%.
Same stock, same strike, same DTE. More than double the income — because IV Rank told you when to sell.
How ThetaScout uses IV Rank
ThetaScout displays IV Rank as a color-coded badge on every screening result — so you never have to calculate it yourself or wonder whether a premium is actually good.
Free users see a simplified label (Low, Medium, or High) with a visual bar. Pro users see the exact IV Rank number, percentile, and a descriptive label that interprets the data.
ThetaScout's Conservative preset automatically filters for an IV Rank minimum threshold. If premiums aren't elevated enough to be worth selling, the Conservative preset won't surface those opportunities.
This is the difference between a screener that shows you what's available and one that tells you what's actually worth taking.
Quick reference
| IV Rank | What It Means | Action |
|---|---|---|
| 0–20Low | Premiums near yearly lows | Consider waiting. Risk of assignment isn't worth below-average income. |
| 20–50Medium | Premiums in average range | Acceptable if liquidity, trend, and event calendar are all favorable. |
| 50–80High | Premiums elevated vs. history | Good time to sell. Above-average compensation for the same risk. |
| 80–100Very High | Premiums near yearly highs | Excellent premium environment — but check for earnings or events. |
Frequently asked questions
What is a good IV Rank for selling covered calls?+
An IV Rank above 50 is generally considered favorable for selling covered calls, as it means premiums are in the upper half of their yearly range. Above 70 is excellent — you're collecting well-above-average income. Below 20, premiums are near their yearly low and may not adequately compensate you for the risk of assignment.
How often should I check IV Rank before selling a covered call?+
Check IV Rank every time you're about to enter a new covered call position. IV Rank changes daily and can shift significantly around earnings announcements, macroeconomic events, or market-wide volatility spikes. A stock that had an IV Rank of 30 last week might be at 65 this week if the market sold off.
Can IV Rank be higher than 100 or lower than 0?+
No. IV Rank is bounded between 0 and 100 by definition. An IV Rank of 0 means current IV equals the 52-week low. An IV Rank of 100 means current IV equals the 52-week high. If current IV breaks above the previous 52-week high, the new high becomes the upper bound and IV Rank stays at 100 until the range updates.
Is IV Rank the same as IV Percentile?+
No. They measure related but different things. IV Rank tells you where current IV sits within its 52-week range (high minus low). IV Percentile tells you the percentage of days in the past year when IV was lower than it is now. IV Rank is more sensitive to extreme spikes, while IV Percentile gives a broader picture of how unusual today's IV level is.
Why is IV Rank high before earnings?+
Implied volatility rises before earnings because the market is pricing in the possibility of a large price move in either direction. This inflates option premiums, which makes IV Rank spike. After earnings are announced, IV typically collapses (called 'IV crush') because the uncertainty is resolved. High IV Rank before earnings is a trap for covered call sellers — the elevated premium looks attractive, but the risk of a large move is what's driving it.