Strategy & terms guide

Premium

The price of an option — what a buyer pays and a seller collects. If you sell an option, the premium is your income; you keep it if the option expires worthless. “Selling premium” is the core idea behind most high-IV strategies.

Implied volatility (IV)

The market’s forecast of how much a stock will move, baked into its option prices. Higher IV means bigger expected moves — and more expensive options (fatter premium). It says nothing about direction, only size of the expected move.

IV Rank

Where a stock’s current IV sits within its own past-year range, on a 0–100 scale. IV Rank 80 means IV is near the top of its yearly range (options are expensive right now); IV Rank 10 means near the bottom (cheap). This is the main number IVFactor sorts by.

IV Percentile

The percentage of trading days over the past year that IV was lower than it is today. Similar to IV Rank but based on how often, not just the high/low range — a useful cross-check.

52-week IV high / low

The highest and lowest implied volatility the stock has seen over the past year. IV Rank is measured against this range.

Earnings (ER badge)

A company’s upcoming earnings report. Earnings tend to inflate near-term IV because the market expects a large move. High IV Rank driven by earnings behaves differently — which is why IVFactor suggests defined-risk plays into earnings.

High / Elevated / Low IV

IVFactor’s color bands. High (IV Rank ≥ 50, red) — options expensive, favor selling premium. Elevated (25–50, amber) — lean toward selling. Low (< 25, green) — options cheap, favor buying.

Sell an out-of-the-money call spread and an out-of-the-money put spread at the same time. You collect premium and profit if the stock stays within a range. Because both sides are spreads, your maximum loss is capped (“defined risk”) — which is why it’s the go-to when high IV is driven by an earnings event that could cause a big move.

Sell an out-of-the-money call and an out-of-the-money put (no protective legs). You collect more premium than an iron condor, but your risk is undefined — a large move in either direction can cause outsized losses. Best when IV is high and you expect the stock to stay calm.

Sell a put and set aside enough cash to buy 100 shares if you’re assigned. You collect premium up front; if the stock stays above the strike, you keep it as income. If it drops below, you buy the stock at an effective discount (strike minus premium). A common way to get paid while waiting to own a stock cheaper.

Own 100 shares of a stock and sell a call against them. You collect premium as income; in exchange, your upside is capped at the call’s strike. If the stock stays flat or rises modestly, you keep both the shares’ gains and the premium.

Buy a call to profit if the stock rises. Because you’re buying premium, it’s most attractive when IV is low (options are cheap) and you expect the stock to move up — rising IV then works in your favor too. Your risk is limited to the premium paid.

Sell a near-term option and buy a longer-term option at the same strike. You profit from the faster time-decay of the near-term leg and from IV expanding. A go-to when IV is low and you expect it to rise.