Market Measures

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Daily Range and IV Rank

Market Measures

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There are many ways we can use IV Rank as a gauge for opportunity, and today we are going to discuss how it can be an estimator of the daily range in SPY.

Study
  • SPY, 2017 to present (most recent price data)
  • Recorded IV Rank
  • Recorded daily range (day’s high minus day’s low)
  • Observed relationship between the two

We find that we can estimate the day’s range by using the following formula: IVR * 0.1 + 1. For example, when IVR is 0, the day’s range in the SPY is expected to be 1 point. When IVR is 30, we expect a range of 4 points. When IVR is 100, we expect a range of 11 points.

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