IV Rank and Market Regime

Implied volatility tells you how expensive options are. IV rank tells you whether it’s cheap or expensive relative to the same name’s recent history. Tradient uses IV rank in three places: as a filter, as a scoring component, and as a regime label. This page explains all three.

IV vs IV rank vs IV percentile

• IV (implied volatility)is the market’s annualized expected standard deviation of returns, backed out of option prices. It’s a level — 25% means the market thinks the stock will move within ±25% one standard deviation over a year.
• IV ranknormalizes the level to the past year’s range: (IV − IV_low) / (IV_high − IV_low) × 100. An IV rank of 75 means the current IV is 75% of the way from the year’s low to the year’s high.
• IV percentile is the percentage of trading days in the past year where IV was below the current level. Different shape, similar intuition.

Tradient uses IV rank everywhere because it’s simpler to explain and reacts faster than percentile when vol regimes shift. Both are valid; we picked one and stuck with it.

The regime buckets

Raw IV rank gets bucketed into a labeled regime so the UI can explain why a trade is attractive:

How IV rank propagates into the score

The Tradient Score has a 15% weight on “IV fit,” which is computed differently depending on the strategy category:

• Short premium strategies (income, credit spreads, condors, strangles) get IV fit = IV_rank / 100. Higher is better.
• Long premium strategies (long straddles, debit spreads) get IV fit = 1 − (IV_rank / 100). Lower is better.
• Hedging / other get a flat 0.5.

This is why the same SPY iron condor scores 8 points higher when IV rank rises from 30 to 70, and why a long straddle scores 8 points lowerover the same move. The scoring layer is reflecting the strategy’s economic prerequisite: short vol needs vol to sell, long vol needs vol to buy.

Regime fit and the VIX overlay

Beyond the per-name IV rank, Tradient tracks a market regime snapshot — primarily the VIX bucket (low, normal, elevated, high) — and uses it to compute a separate Regime Fit score for each result.

The base alignment table looks like this:

On top of the base, there’s a cross-check: if VIX is high but the individual name’s IV rank is below 40, we dock the short-premium fit by 10. The overall market can be scared while a specific underlying is calm, and selling premium on the calm name is bad even if the macro looks right. The same dock applies in reverse to long premium when the name’s IV rank is above 60 in a calm overall market.

How to use it as a trader

• When you open Radar, glance at the regime strip first. If VIX says “low,” the income scans will return fewer attractive results — not because the scanner is broken, because the market isn’t paying for income.
• When IV rank on a specific name is “crushed,” that’s the moment to look at long straddles, not short condors. Tradient’s scoring already nudges you there.
• When IV rank is “extreme,” check why. Earnings? Lawsuit? FDA? Selling premium into a known catalyst is the short-vol trader’s blowup pattern.

Where to go next

• Tradient Score — how IV fit is weighted in the composite.
• Black-Scholes & Greeks — where IV comes from in the first place.