Quick volatility translation
Rule of 16 for implied volatility
The Rule of 16 is a shortcut for translating annualized implied volatility into a rough one-day expected move: stock price × IV ÷ 16.
Example
If a $100 stock has 64% implied volatility, the rough one-day expected move is $100 × 0.64 ÷ 16 = $4. This estimates magnitude, not direction.
Use carefully: the Rule of 16 is a shortcut. It does not replace option-chain analysis, expiration-specific implied moves, skew checks, or risk controls.
Why it belongs in an IV crush workflow
If the one-day expected move is smaller than the move your long premium needs to beat IV crush, the setup may be structurally difficult.
Primary reading: OIC implied volatility overview · OIC Vega guide · OIC volatility and Greeks · FINRA options basics and Greeks · SEC Investor Bulletin on options