How to See Implied Volatility (IV) Rank on ThinkorSwim
Updated: 6 days ago
Table of Contents
What are Implied Volatility and Historical Volatility
What is Implied Volatility Rank (IVR)
How to Add Implied Volatility Rank to Thinkorswim
The Custom Tastytrade Indicator for Thinkorswim
How to Scan for Implied Volatility Rank in Thinkorswim
How to Add the Tastytrade Custom Indicator to ThinkorSwim
Discover the difference between IV rank and IV percentile, and how you can add IV rank to the ThinkorSwim platform.
What are Implied Volatility and Historical Volatility
Before we get into implied volatility rank (IVR), we must understand implied volatility (IV) and historical volatility (HV). HV is also known as realized volatility.
The implied volatility of an underlying stock is a measure of the market’s expectation of future price movement. Implied volatility is a component of the Black-Scholes model used to determine option prices.
A stock with high implied volatility is expected to move a lot and have high option premiums and vice versa.
Historical volatility measures how far a stock's price moves away from its average. Essentially, the higher the realized volatility of a stock, the riskier it is.
What is Implied Volatility Rank (IVR)
IVR is a measurement used by options traders to determine how the current implied volatility of a stock compared to the last 52 weeks. IVR is measured on a scale of 0-100. 0 is the lowest IV in the past year, and 100 is the highest in the past year.
Option traders utilize IVR to determine if implied volatility is high or low compared to what it usually trades at. Generally, you should sell options with high IV to take advantage of the elevated premiums.
What is IV Percentile (IVP)
IVP is a similar metric to IVR, except it measures the percentage of days over the last 52 weeks that implied volatility was lower than its current level. For example, if the IVP of a stock is at 25%, that means 75% of the time over the last year, IV was higher.
IV Rank vs. IV Percentile
Both IVR and IVP are valuable metrics for options traders to use. The difference is that IVP measures a percentage of days, while IVR measures IV itself.
How to Calculate IV Rank
To determine the IV rank of a stock, you must figure out the range implied volatility traded between the last 52 weeks. For example, let’s say that a stock’s IV traded between 20% and 40% over the previous 52 weeks.
If the current implied volatility is 30%, the stock’s IV rank is 50.
How to Add Implied Volatility Rank to Thinkorswim
If you use ThinkorSwim to trade options, you may realize there is no default indicator for IV rank. However, ThinkorSwim does have IV rank by default, except it is misnamed as IV percentile.
To prove this, I have screenshots of the IV rank of AAPL on the Tastyworks platform and the ThinkorSwim platform.
IV rank on the Tastyworks platform
As shown in the image above, the Tastyworks IV rank high is around 94.
If we look at the same ticker on ThinkorSwim, the IV percentile is 92%, while it says the IV rank is 63%.
IV rank indicator on ThinkorSwim
Therefore, the calculations are slightly off, but they are close enough to consider them the same indicator.
The Custom Tastytrade Indicator for ThinkorSwim
In the ThinkorSwim image above, you may notice that I am utilizing a custom indicator called TTIV (Tastytrade IV). The indicator displays both an IV percentile and IV rank calculation.
It is confusing because the IV percentile on the custom indicator utilizes the built-in ThinkorSwim IV percentile indicator, which is actually the IV rank.
However, if you add IVR to your Tastyworks watchlist, it says the IVR is 73, and the IV percentile is 95%.
Therefore, I have concluded that these numbers do not match and are not worth deciphering. However, if you want access to the custom indicator, I will leave the code and instructions at the bottom of this post.
My advice is to pick one method of tracking the IV rank or IV percentile and stick with it, so it is the same for all of your trades.
Otherwise, you can plot the normal implied volatility indicator on your chart and determine whether you believe the implied volatility is elevated or low.
How to Scan for Implied Volatility Rank in Thinkorswim
ThinkorSwim has a built-in stock scanner that allows you to discover stocks with high IV rank/IV percentile. To utilize it, follow these steps:
Scan tab -> add filter -> volatility -> IV_percentile
IV scanner on ThinkorSwim
Once you add this study, you can scan for stocks that have a specific range of IVR/IVP.
How to Add the Tastytrade Custom Indicator to ThinkorSwim
To add the Tastytrade (TTIV) custom indicator to your ThinkorSwim charts, follow these steps:
Chart tab -> studies (beaker) -> create -> enter name (TTIV) -> delete the default code and paste in the following code:
Adding a custom study to ThinkorSwim
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# ------------------------START BELOW THIS LINE--------------------------
#
# tastytrade/dough Research Team
# Michael Rechenthin, Ph.D.
# Follow me on twitter: @mrechenthin
#
# IV Rank is a description of where the current IV lies in comparison
# to its yearly high and low IV
#
# IV Percentile gives the percentage of days over the last year, that
# were below the current IV. If the IV Rank is above 50%, then
# the script will highlight it green; otherwise red.
#
# For information on the two, see Skinny on Options Data Science,
# titled "IV Rank and IV Percentile (w/ thinkscript)" on Nov 12, 2015
# http://ontt.tv/1Nt4fcS
#
# version 3.2
#
declare lower;
declare hide_on_intraday; # do not display when using intra-day plots
input days_back = 252; # it is most common to use 1-year (or 252 trading days)
def x;
if GetAggregationPeriod() > AggregationPeriod.DAY {
x=1;
} else {
x=2;
}
AddLabel(yes, if (x==1) then "This script should be used on daily charts only" else "");
# implied volatility
# using proxies for futures
def df = if (GetSymbol() == "/ES") then close("VIX") / 100
else if (GetSymbol() == "/CL") then close("OIV") / 100