One bad day is wrecking your vol reads

One spike to 120% a year ago is still messing with your reads today.

That's the problem with IV Rank. It measures where current IV sits between the 52-week high and low. Sounds reasonable, until one Volmageddon day blows out the range and everything after it looks "low."

Say IV is at 50%. Feels elevated. But if the 52-week high was 120%, your IV Rank reads 30%. Looks cheap. You might skip selling premium that's actually expensive.

IV Percentile fixes this. It asks a different question: how many days in the past year was IV lower than right now?

If IV is 50% and it's only been higher on 5 out of 252 trading days, your Percentile is 98%. That correctly tells you implied vol is high, it may not be expensive (that depends on realised vol), but it is high compared to where it typically trades.

On the desk, we never looked at IV Rank without checking Percentile first. Here's the framework:

IV Percentile tells me IF I should be a net seller or buyer. IV Rank tells me HOW MUCH room is left if vol keeps climbing.

Percentile for most of the distribution. Rank for the tail risk extremes.

Don't let one bad day in the past distort your edge today.

Volatility first.