Do they grade lateral ligament sprain in knee?

Not as often. While many physicians grade ligaments sprains by grade (such as the mcl), the lateral collateral ligament is much more complex. It is more often associated with PCL (posterior cruciate ligament) tears, multiligament tears (or knee dislocations). The lateral collateral represents a number of ligaments that hold the outside of the knee stable. It is more complex than can be addressed here.
Yes. Lateral collateral ligament sprains are graded i, ii, or iii. I has tenderness and no increased laxity of the ligament. Ii has more pain, and laxity of 5 mm. Iii is a complete tear of the ligament with greater laxity and can be associated with a tear of the acl.