How to Use IV to Find Options Trades

Most traders learn what implied volatility is before they learn how to use it systematically. This article is about the practical application: a repeatable workflow for using IV rank and related volatility metrics to find high-quality options trades, filter out low-quality setups, and time your entries more precisely.

The core principle

Implied volatility tells you one thing with reliable consistency: whether options are expensive or cheap relative to recent history for that specific stock.

That single signal drives the most important decision in options trading: are you selling premium or buying it?

• High IV rank (above 50): Options are expensive. Selling premium has statistical edge.
• Low IV rank (below 30): Options are cheap. Buying premium has statistical edge.
• Mid-range IV rank (30–50): No strong volatility edge. Other factors determine trade direction.

Everything else in IV-based trade discovery is an elaboration on this principle.

Step 1, Screen by IV rank

The starting point is always IV rank. Open Stryke's Options Screener and sort by IV rank descending.

The tickers at the top of this list are your highest-priority candidates for premium-selling strategies. They have the most elevated options premiums relative to their own history, which means more credit to collect, more cushion in your breakevens, and a higher probability that IV will mean-revert in your favor after you enter.

What you're looking for at this stage:

• IV rank above 50 for credit spreads and iron condors
• IV rank above 60 for more aggressive premium-selling strategies
• IV rank below 25 for debit spreads and directional long options

Don't stop at the top of the list mechanically. IV rank is the filter, not the entire decision.

Step 2, Cross-reference with the Earnings Calendar

High IV rank often has a reason, and that reason matters.

The most common explanation for elevated IV rank is an upcoming earnings announcement. Before entering any premium-selling position on a high-IV-rank ticker, check the Earnings Calendar to confirm whether earnings are approaching.

If earnings are within your expiration window: The elevated IV is entirely explained by the upcoming event. The moment earnings pass, IV will crush. For credit spreads and iron condors, this is actually an opportunity, you're selling the earnings premium with defined risk. But it requires a different sizing approach (1–2% of portfolio, defined risk only) than a standard non-event premium-selling trade.

If no earnings are within your expiration window: This is the cleaner setup. IV is elevated without an obvious near-term catalyst that will force it to resolve on a specific date. The market is overpricing uncertainty, and that overpricing is likely to gradually erode in your favor as you collect theta.

Step 3, Compare IV to historical volatility

After identifying a high-IV-rank ticker with no earnings in the window, take the analysis one level deeper: compare current IV to recent historical volatility (HV).

The IV/HV comparison tells you whether options are expensive relative to what the stock has actually been doing:

• IV significantly above 30-day HV (ratio above 1.5): Strong overpricing signal. Options are priced for much more movement than the stock has been delivering. Premium sellers have clear edge.
• IV moderately above HV (ratio 1.1–1.5): Mild overpricing. Reasonable for selling if IV rank also confirms.
• IV at or below HV: Options are fairly priced or cheap. No strong selling edge from IV alone.

This check is especially valuable for filtering out false positives, tickers with high IV rank because they've genuinely been volatile (high HV) versus tickers with high IV rank because uncertainty has spiked while actual movement has remained calm.

Step 4, Check liquidity before committing

High IV rank on an illiquid ticker is not a tradeable opportunity. It's a data point.

Before placing any trade discovered through IV screening, confirm:

• Bid-ask spread: Under $0.10 on near-the-money options, or under 10% of the option price
• Open interest: Above 500 contracts at your target strike
• Daily volume: At least a few hundred contracts traded today across the chain

If the spread is $0.80 wide on a $2.00 option, the IV edge is consumed by the trading friction before you've even entered the position.

Step 5, Select strategy based on IV rank and market outlook

With a liquid, high-IV-rank ticker identified, the strategy choice follows directly from your market outlook:

Neutral on the stock (no strong directional view): Iron condor, sell OTM call spread and OTM put spread on both sides. Maximum premium, maximum theta, profits from the stock staying range-bound.

Mildly bullish: Bull put spread, sell OTM put spread below the stock. Collects elevated put premium (amplified by volatility skew) with bullish directional bias.

Mildly bearish: Bear call spread, sell OTM call spread above the stock. Collects elevated call premium with bearish directional bias.

Own the stock: Covered call, sell OTM call against your shares. Elevated IV means more premium collected for the same strike distance.

Want to own the stock at a lower price: Cash-secured put, sell OTM put below current price. Elevated IV inflates the put premium significantly.

Step 6, Choose your strike using delta

After selecting your strategy, use delta to place your strikes at the right probability level:

• Conservative (higher probability of profit): Target 0.15–0.20 delta on short options (~80–85% probability of expiring worthless)
• Standard: Target 0.25–0.30 delta (~70–75% probability)
• Aggressive (more premium, lower probability): Target 0.35–0.40 delta (~60–65% probability)

In high-IV environments, even the 0.25 delta strike often provides meaningful premium because the entire options chain is inflated. You don't need to move close to ATM to collect worthwhile credit.

Step 7, Set your exit plan before entering

The final step before placing the trade, define your exits:

• Profit target: Close at 50% of max profit (standard for credit spreads and iron condors)
• Time stop: Close at 21 DTE regardless of profit level
• Stop loss: Close if the spread reaches 2× the credit received
• Catalyst change: Close immediately if earnings are announced within your window unexpectedly, or if a major news event changes the stock's risk profile

Write these levels down or set alerts before entering. A trade without defined exits is just speculation.

The complete workflow, one page

1. Sort Options Screener by IV rank descending
2. Identify tickers with IV rank above 50
3. Cross-check with Earnings Calendar, note which have events in the window
4. Compare IV to 30-day HV, confirm overpricing
5. Check bid-ask spread and open interest, confirm liquidity
6. Select strategy based on directional outlook
7. Place short strikes at 0.20–0.30 delta
8. Set profit target (50%), time stop (21 DTE), and stop loss (2× credit)
9. Enter the trade

This is a repeatable, systematic process that can be run in 10–15 minutes any trading morning. The edge is in the consistency, running this process across many trades over many months, letting the volatility risk premium accrue.

Related terms: IV rank, IV percentile, historical volatility, iron condor, bull put spread, delta, theta, bid-ask spread

Try it on Stryke: Start with the Options Screener sorted by IV rank, then cross-reference with the Earnings Calendar to build your weekly trade list.