What is IV crush in options?

IV crush is the rapid drop in implied volatility immediately after a scheduled uncertainty — usually an earnings report — resolves. The event premium built into option prices disappears, so options can lose substantial value even when the stock moves in the buyer's favor.

How do you avoid IV crush?

Close long options before the event, buy longer-dated expiries that carry less event premium, or structure spreads that are short an expensive option against the one you own. If holding through the event, know the implied move and require your directional thesis to beat it.

Does IV crush affect all expirations equally?

No. The nearest expiration carries the most concentrated event premium and crushes hardest. Longer-dated options embed the event as a smaller share of total time value, so their IV drops less.

IV crush, explained

You called the direction, the stock moved your way, and your calls still lost money. This is why.

IV crush is the sudden collapse in implied volatility the moment a known uncertainty resolves — most commonly the morning after earnings. Option prices carry an event premium for the expected jump; once the report is out, that uncertainty no longer exists, IV reverts toward normal levels instantly, and the extrinsic value it supported evaporates. A stock can move 4% in your direction while your option loses money, because 6% worth of expected move was priced in and repriced away.

Why it happens

Implied volatility is the price of uncertainty. Before earnings, nobody knows whether the stock gaps up 8% or down 8%, so options on both sides carry a premium for that binary. The report itself converts the unknown into the known — and the premium for not-knowing has no reason to exist within minutes of the number hitting the tape. This isn't market makers "stealing" premium; it's the uncertainty itself disappearing. The same dynamic applies to FDA decisions, court rulings, CPI prints on index options, and any event with a date on the calendar.

How big is the crush?

For a typical large-cap around earnings, front-expiry IV might run up from 30% to 55–70% in the two weeks before the report and collapse back to near 30% overnight. On short-dated at-the-money options, where value is nearly all extrinsic, that repricing routinely erases 30–50% of the option's value at the open — before the stock even trades. The nearest expiry gets hit hardest because its price is almost pure event premium; later expiries carry proportionally less and crush less.

The expected move is the honest yardstick

The market tells you, precisely, how big a move it's charging for: the at-the-money straddle price. If the straddle costs $8 on a $200 stock, the implied move is about ±4% (a common refinement multiplies by ~0.85 for the 1σ estimate). Buyers of pre-earnings options profit only if the actual move beats that number — direction alone is not enough. Check the implied move before the trade with our free Expected Move Calculator, and compare today's IV against normal levels with the widget below.

Trading around it

Long-premium traders avoid the crush by closing before the event, going further out in expiry where the crush is shallower, or using spreads that sell rich IV against what they buy (verticals, calendars). Premium sellers deliberately harvest the crush — short straddles and strangles into earnings are bets that the realized move stays inside the implied one — accepting open-ended tail risk in exchange. Both are legitimate; the only indefensible position is holding a long option through earnings without knowing the implied move you need to beat.

Common mistakes

"The stock moved my way, so my option must be up." Only if the move exceeded what was priced in. A 3% pop against a 6% implied move is a losing long-call trade at the open.

Judging pre-earnings IV as "too high" against history. IV Rank is always stretched before a known event — that's rational pricing, not free money for sellers.

Forgetting crush works for you as a seller only until it doesn't. The one earnings gap that clears the implied move can return months of collected premium. Size accordingly.

Try it live

The numbers below are real — pulled from OptionScope's volatility dataset (CBOE IV plus nightly stats covering ~2,300 optionable tickers). Look up any symbol:

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