Implied Volatility Rank (abbreviation: IV Rank) – literally the current percentile rank for the implied volatility range of an underlying over a given time period (usually 1 year). It is calculated by:
(current IV – 1 year IV low) / (1 year IV high – 1 year IV low) x 100

So how does it apply to trading ? It is quick way to compare the relative volatility of underlying instruments against each other.

For example, if NFLX has had a implied volatility range of 50% to 150% in the last year, and its current volatility is 60% it’s IV Rank is likely about 10. That means that the current 60% implied volatility reading is among the 10% lowest readings in the last year. Therefore the relative volatility for NFLX is “low”.

Conversely if SPY has had a volatility range of 10% to 25%, and its current volatility is 23% its IV Rank is likely about 90. That means that 90% of SPY volatility readings this year have been below the current 23% value. Therefore the relative volatility for SPY is “high”.

The nice thing about IV rank is now both NFLX, SPY and all other underlyings can now be compared side by side, because it is a relative measure for all underlyings. Also you can compare IV Rank across products like futures and ETFs, because it is a relative measure. So you can see if /CL crude oil has relatively high volatility compared the S&P 500 (SPY).