A volatility number means nothing on its own
Implied volatility (IV) drives option prices more than almost anything else — but a raw IV number, like "32%", doesn't tell you whether that's high or low. A stock that normally trades at 60% IV looks calm at 32%. A stock that normally trades at 15% IV looks panicked at 32%. You need context.
IV Rank gives you that context
IV Rank answers a simple question: where does today's IV sit relative to its own range over the past year, on a scale from 0 to 100%? A reading of 18% means IV is near the bottom of its own typical range — historically cheap. A reading of 85% means IV is near the top — historically rich.
This matters because of a basic trade-off: buying options costs more when IV is high, and selling options collects more when IV is high. As a rough rule of thumb, traders favor buying premium when IV Rank is low, and selling premium when IV Rank is high — all else being equal.
Pairing IV Rank with a trend read
IV Rank tells you whether premium is cheap or expensive — it doesn't tell you which direction the stock is heading. Pairing it with a simple trend read (is the price above or below its recent average?) rounds out the picture: cheap premium in an uptrend favors buying calls; rich premium in a flat market favors selling premium via the strategies in the next two modules.