IV Percentile Filter: How IVP Doubled a 0DTE Iron Condor's Capture Rate
Option Omega added IV percentile, IV rank and HV filters. In a quick backtest, a 20–80 IVP range roughly doubled a 0DTE SPX condor's capture rate.
In Matt’s quick backtest, one simple filter roughly doubled the premium capture rate of a 0DTE SPX iron condor: only trade when IV percentile is between 20 and 80. Matt built the test in about five minutes the night Option Omega released its new implied volatility tools, and the chat then found that a second filter on the test barely mattered.
On this episode of The Option Trading Show, Matt, Troy and Dan Sheridan called it “more of a deep tease than a deep dive”: a first look at the new IV tools, with more testing to come. Matt also wanted viewers to send in their own ideas for the filters.
What’s in the IV release
The release added several volatility readings to Option Omega. They work in entry conditions, exit conditions, backtesting and automation.
| Reading | What it is |
|---|---|
| IVP (IV percentile) | Where the current IV sits relative to the daily IV readings over the last year |
| IVR (IV rank) | Where the current IV sits between the past year’s lowest and highest IV: (current − low) ÷ (high − low) |
| IV9 and IV30 | 9-day and 30-day implied volatility |
| IV9/IV30 ratio | Short-term IV relative to 30-day IV |
| HV30/IV30 ratio | 30-day historical volatility relative to 30-day IV |
Some of these readings already existed for SPX. The hosts kept this episode to IVP and IVR and said they would cover the ratios in later shows.
IV percentile vs IV rank
Both compare today’s IV to the past year. Matt’s preference is IVP, and he explained it with an analogy: IVR is to IVP what the Sharpe ratio is to the Sortino ratio. In his view, IVR “punishes the wrong thing,” in the same way he feels Sharpe does, which is why Option Omega uses Sortino. When there is a big outsized move in the past year, he feels IVP handles it better, while IVR stays more consistent. He was clear this is his opinion, and that both are available because users asked for both.
The baseline: a 0DTE condor with no stop
The starting backtest was a 0DTE SPX iron condor Option Omega has published variations of before. It used none of the new IV tools.
- Days: every day except Thursday
- Entry: the backtest gives the market an hour to settle after the open, then enters only if SPX has not broken out of its opening range
- Stop loss: none. The long legs define the risk, so the spreads act as their own stop
- Other filters: none
Matt said the backtest had “crushed it” this year (2026, as of the show) and did not feel overfitted to him: he had removed one day and added nothing else.
Adding a 20–80 IVP filter
Matt then added one condition: IV percentile between 20 and 80. Below 20, no trade. Above 80, no trade. The idea was to trade only in “the boring middle.”
The result: the capture rate roughly doubled in this backtest. The filter cut a lot of trades. He ran one other variation that did even better, but did not show it, and he stressed that he had not done a series of optimizations or out-of-sample tests. It was a quick test of a simple, explainable idea.
Matt likes to be able to state the thesis behind a filter, while acknowledging that some traders have done well with settings they couldn’t explain. Here the thesis was a weather check, a way he remembers Dan teaching RSI years ago: is it too windy to trade, like standing by Lake Michigan in a storm? Or is it as dry and still as the middle of the Sahara? If neither, it is a normal day, which fits the thesis for a short condor.
Dan agreed that the logic fit. A narrow opening range plus normal IV is a reasonable setting for an iron condor, even though nobody knows what the next hour brings.
The chat’s finding: the opening range barely mattered
A viewer in the chat suggested removing the opening range breakout filter. Matt tried it live. The result barely changed. That left a very simple backtest: a 0DTE SPX condor about an hour after the open, after the morning news, only when IVP is between 20 and 80.
Then Matt ran the reverse check and removed the IV filter entirely. That took the capture rate back down by about half, with some serious drawdowns. In this quick test, the IV filter did the work.
Why trim the tails: Dan’s view on high IVP
Dan said the common retail rule, “IV percentile is in the 90th, so sell,” has always bothered him. During the COVID crash, traders who sold at 30 volatility, then 40, 50 and 60, were out of money before it peaked. A high IV percentile in the S&P, in his words, usually means the market is tanking. He wants high IV only with some sign the world is not ending.
Matt noted that someone could test that idea by pairing an IV condition with an EMA. Troy’s suggestions for other ideas to test with the new filters:
- Trim the tails on premium-selling trades, but without cutting so far that you curve fit into “the meat”
- Double calendars
- Equities and commodities. Troy showed Matt a GLD backtest with a completely different thesis, where an IV filter made a big difference
The Sherman tank, three weeks later
The episode opened with a follow-up on Dan’s Sherman tank butterfly, modeled on the show on August 21. Matt pulled up the same model (he was about 90% sure it was the exact one), and in what had been a range-bound market, it had done okay, “pretty well” in recent times. He stressed that how one example did is no indication of how it will do in the future.
Troy has been trading a variation on SPX that takes profit, sometimes before the target. His trade log as of the show: winners of 37%, 41%, 33% and 23%, and one loser of 4% (very small sample size!).
How Dan builds it
Dan explained why he calls it the Sherman:
- Structure: a 70/60 broken wing call butterfly about three weeks out. Start at the money, sell two calls, buy one call 70 points below the short and one 60 points above it. (Later in the same answer he referred to the standard Sherman as a 70/65.)
- Deltas: roughly delta neutral at entry, which Dan defines as within about one to two deltas either way.
- Purpose: the upside has minimal risk compared with the downside, and the extra width lets it handle a down move of about 50–60 points under break-even, so an 80–90 point down day does not carry you “off the battlefield.”
For heavier downside, Dan’s “Hummer” is the balanced butterfly. It’s still a debit, so it can lose money, but he said it can handle 200–250 points down. If the market rallies 60 points right away, though, it can be down 10–15%. He uses it sparingly, such as when VIX gets above 18, because the market generally goes up. On the day of the show, after a rally and a two-point VIX drop, he said he would rather do a calendar.
Dan also likes the three-week timeframe because, especially in the first week or so, gamma does not move against the position much. Matt added a caution: stacking a new butterfly every day stacks up risk if a big move comes at the wrong time.
Matt’s broader view is that wide, range-bound butterflies at 15 to 60 DTE were a retail staple before 0DTE took the spotlight, and that multi-week range-bound flies could have done pretty well this year. Troy added that fewer traders than he would expect have looked at trading them mechanically.
Key takeaways
- IVP, IVR, IV9, IV30 and HV ratios are now available for entries, exits, backtesting and automation.
- A 20–80 IVP range roughly doubled the capture rate of a no-stop 0DTE SPX condor in a quick, unoptimized backtest.
- Removing the opening range filter barely changed it; removing the IV filter cut the capture rate about in half.
- Matt wanted a thesis he could state. His “weather check” is a reason, not a fitted number.
- Dan doesn’t treat high IVP as an automatic sell signal. In his view it often means the market is falling.
- The Sherman tank, as Dan described it here, is a 70/60 broken wing call fly about three weeks out, roughly delta neutral.
Try the IV filters
Matt said he would share the backtest from the show in the Option Omega Discord. To build your own, add an IV percentile or IV rank condition to any backtest in the backtester, compare it against the same test without the filter, and try the filter on other structures. For a longer-dated trade that uses an IVP cap, see the 21 DTE SPX iron condor. Start a free trial or join the Discord to send the hosts your ideas.
Watch the full video: The Option Trading Show IV Percentile and more.
Backtest results are hypothetical and do not guarantee future performance. Options trading involves substantial risk.
