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+are a few observations to be made that can help a trader make better-
+educated decisions about IV.
+Reversion to the Mean
+The IVs of the options on many stocks and indexes tend to trade in a range
+unique to those option classes. This is referred to as the mean—or average
+—volatility level. Some securities will have smaller mean IV ranges than
+others. The range being observed should be established for a period long
+enough to confirm that it is a typical IV for the security, not just a
+temporary anomaly. Traders should study IV over the most recent 6-month
+period. When IV has changed significantly during that period, a 12-month
+study may be necessary. Deviations from this range, either above or below
+the established mean range, will occur from time to time. When following a
+breakout from the established range, it is common for IV to revert back to
+its normal range. This is commonly called reversion to the mean among
+volatility watchers.
+The challenge is recognizing when things change and when they stay the
+same. If the fundamentals of the stock change in such a way as to give the
+options market reason to believe the stock will now be more or less volatile
+on an ongoing basis than it typically has been in the recent past, the IV may
+not revert to the mean. Instead, a new mean volatility level may be
+established.
+When considering the likelihood of whether IV will revert to recent levels
+after it has deviated or find a new range, the time horizon and changes in
+the marketplace must be taken into account. For example, between 1998
+and 2003 the mean volatility level of the SPX was around 20 percent to 30
+percent. By the latter half of 2006, the mean IV was in the range of 10
+percent to 13 percent. The difference was that between 1998 and 2003 was
+the buildup of “the tech bubble,” as it was called by the financial media.
+Market volatility ultimately leveled off in 2003.
+In a later era, between the fall of 2010 and late summer of 2011 SPX
+implied volatility settled in to trade mostly between 12 and 20 percent. But
+in August 2011, as the European debt crisis heated up, a new, more volatile
+range between 24 and 40 percent reigned for some time.