Implied volatility is the measure of future movements in a particular stock. But, how do we know if an IV of 20% in SPY is high enough to warrant selling premium?
IV Rank uses the low point and the high point of a year’s worth of IV data, and spits out a number (0-100%) that says how high or low IV is now relative to the past year’s data. The higher the IV Rank, the better the chance that IV will revert to its mean and provide option sellers with profits.
Looking at raw IV in conjunction with IV Rank provides a good metric as to whether or not to sell options.