IV Percentile
A single number that tells you whether options are cheap or expensive relative to their own history.
Definition
IV Percentile measures the percentage of trading days in a lookback window (commonly 252 days, or one year) on which the underlying's implied volatility was lower than today's level. A reading of 80 means current IV is higher than it was on 80 percent of past trading days — placing it in the expensive zone by recent standards. A reading of 20 means IV is currently lower than on 80 percent of past days — relatively cheap. The metric provides essential context that a raw IV number alone cannot: Nifty ATM IV of 15 percent sounds moderate, but if the one-year range is 10–18 percent, a percentile of 83 reveals it is actually near its upper bound.
Why it matters
Option strategy selection depends critically on whether implied volatility is cheap or rich relative to its history. When IV Percentile is high (above 70–80), options are expensive; selling strategies — short straddles, iron condors, covered calls — are more favourably priced because the seller receives inflated premium. When IV Percentile is low (below 20–30), options are cheap relative to their range, and buying strategies — long calls, long puts, debit spreads — offer better risk-reward because the buyer pays compressed premium and may benefit from a volatility mean-reversion. Indian F&O traders using weekly Nifty or Bank Nifty expiries often check IV Percentile at the start of the week to calibrate how aggressively to sell premium. It is also useful for comparing richness across underlyings: a stock with an IV Percentile of 90 is expensive relative to its own history regardless of whether its raw IV is 20 percent or 60 percent.
Formula
IV Percentile = (Number of days in lookback where IV < IVtoday) ÷ (Total days in lookback) × 100. For example, if in 252 trading days, 189 of them had IV below today's reading: IV Percentile = (189 ÷ 252) × 100 = 75. This differs from IV Rank, which rescales to the period's min-max range rather than counting observations.
Example
Say Nifty ATM IV today is 16.5 percent. Over the past 252 sessions, IV was below 16.5 percent on 210 of those days and above on 42. IV Percentile = (210 ÷ 252) × 100 = 83. A trader looking at this might conclude options are rich and lean toward selling a weekly strangle — but would also note that IV Percentile of 83 historically precedes mean reversion, so they size carefully. All numbers are hypothetical and illustrative only.
Check IV Percentile on TradePulse
TradePulse shows IV Percentile alongside live ATM IV so you always know whether you're buying cheap or selling rich.