How to Trade with IV Percentile

Intraday NIFTY Option Strategy Using IV, VIX, ADX, and IV Percentile

This guide helps traders make informed intraday decisions in NIFTY using the combined power of Implied Volatility (IV), India VIX, ADX (Average Directional Index), and IV Percentile.

How to Trade Options with IV + VIX + ADX

• IV (Implied Volatility): Tells us how much option prices may move. Higher IV = bigger price swings.
• VIX (Volatility Index): Measures market fear. VIX > 17 suggests momentum; VIX < 13 = sideways market.
• ADX: Measures trend strength. ADX > 20 confirms trend; ADX < 15 means consolidation.

What is IV Percentile?

IV Percentile shows how current IV compares to historical IV. It tells you whether options are cheap or expensive.

IV Percentile	Interpretation	Trade Action
0–20%	Very low IV (cheap options)	Consider buying options
21–40%	Low IV	Favor long positions
41–60%	Neutral	Use price action confirmation
61–80%	High IV	Consider selling options
81–100%	Very high IV (expensive)	Use spreads or sell strategies

Trading Rules

1. Wait for VIX > 16 and ADX > 20 → Trend likely
2. If PE IV > CE IV → Bias toward PE (puts)bearish position—e.g., buying puts
3. If CE IV > PE IV → Bias toward CE (calls)bullish position—e.g., buying call
4. Use IV Percentile: Buy options when IV percentile is < 30%, Sell when > 70%
5. Confirm with price action (breakout candle, moving average crossover, etc.)

Intraday Option Trading Strategy

• Wait for: VIX > 16 and ADX > 20 → Indicates a trending market.
• IV Skew Bias:
  • If Put IV > Call IV → Bias toward Put Options (PE)bearish position—e.g., buying puts
  • If Call IV > Put IV → Bias toward Call Options (CE)bullish position—e.g., buying call
• Use IV Percentile:
  • Buy Options when IV Percentile is < 30%
  • Sell Options when IV Percentile is > 70%
• Confirm with Price Action:
  • Breakout Candle (above resistance or below support)
  • Moving Average Crossover (e.g., EMA 5/13 or EMA 50/200)

Recommended Timeframes for Intraday Analysis

• 15-Minute Chart: For trend confirmation, ADX check, and overall structure.
• 5-Minute Chart: For breakout candle identification and moving average crossover.
• 1-Minute Chart: For precise entries and stop-loss placement.

Tip: Always align indicators with the price structure for better accuracy. Let the trend guide your position, and use IV data to choose the best instrument (PE or CE).