How to Add IV Rank Chart on ThinkorSwim (Using ThinkScript)

As I was watching an Options Video on Tastytrade's website, I discovered that IV Percentile on ThinkorSwim is really the same as IV Rank on tastytrade. What is IV Rank and IV Percentile? You can check out the video here from tastytrade:

https://www.tastytrade.com/shows/the-skinny-on-options-data-science/episodes/iv-rank-and-iv-percentile-w-thinkscript-11-12-2015

I use IV Rank to determine when to sell and when to sell Options. For instance:

IV Rank < 50% 

Action To Take : Buy Option

Why? : Option Premium Cheaper, so we Buy Low and Sell High

IV Rank > 50%

Action To Take : Sell Option

Why? : Option Premium Expensive, so we Sell High and Buy Back Low

Since on ThinkOrSwim, the IVPercentile is the same as IVRank you can find the IV Percentile in the Trade tab under Today's Options Statistics:

This is just a general rule of thumb but if the IV Rank falls within the above range, the probability of success to make money is higher. I use this determine when to sell and when to buy options. Depending on how confident you are with the stock or underlying asset you are trading, you can adjust this rule a bit.  For instance I can still still Sell Option when it is above 40% as long I am comfortable with the premium amount I receive.

I have here a guide on how to setup an IV Rank chart on ThinkorSwim using ThinkScript. With this it will be easier for me to determine the IV Rank by looking at the chart and see the past history of the IV Rank  as well. 

1) Go to ‘Charts’ tab.

2) Click on the Studies and Strategies icon  

3) Click Create

4) This will open up a New Script. Delete the content and make it blank.

5) Copy all these lines into the New Study Script:

 

declare lower; declare hide_on_intraday; #IVPercentile def vol = imp_volatility(); input DisplayIVPercentile = yes; input DisplayImpVolatility= yes; input DisplayDaily1StandardDev = yes; input DisplayWeekly1StandardDev = yes; input DisplayMonthly1StandardDev = yes; input TimePeriod = 252; def data = if !isNaN(vol) then vol else vol[-1]; def hi = highest(data, TimePeriod); def lo = lowest(data, TimePeriod); plot Percentile = (data – lo) / (hi – lo) * 100; def lowend = Percentile < 25; def highend = Percentile > 50; #Labels addlabel(DisplayIVPercentile , concat(“IV Rank: “,aspercent(Percentile /100)), if lowend then color.red else if highend then color.green else color.yellow); addlabel(DisplayImpVolatility, concat(“ImpVolatility: “,aspercent(vol)), if lowend then color.red else if highend then color.green else color.yellow); def ImpPts = (vol / Sqrt(252)) * close; AddLabel(DisplayDaily1StandardDev , Concat(“Daily 1 SD +/- $”, Astext( ImpPts, NumberFormat.TWO_DECIMAL_PLACES)), if lowend then color.red else if highend then color.green else color.yellow); ; def ImpPts2 = (vol / Sqrt(52)) * close; AddLabel(DisplayWeekly1StandardDev, Concat(“Weekly 1 SD +/- $”, Astext( ImpPts2, NumberFormat.TWO_DECIMAL_PLACES)), if lowend then color.red else if highend then color.green else color.yellow); ; def ImpPts3 = (vol / Sqrt(12)) * close; AddLabel(DisplayMonthly1StandardDev, Concat(“Monthly 1 SD +/- $”, Astext( ImpPts3, NumberFormat.TWO_DECIMAL_PLACES)), if lowend then color.red else if highend then color.green else color.yellow); ; plot LowVol = 25; plot HighVol = 50; LowVol.SetDefaultColor(GetColor(5)); HighVol.SetDefaultColor(GetColor(6));

 

6) Name the Chart. I named mine "IVRankChart"

7) Make sure to highlight the Script you have just created and click "Add Selected". You should see it added (mine appeared under Lower). Then Click OK.

 7) The IV Rank Chart now appears. Remember to save your chart as well (Under Style-->Save Style).