IV crush
A sharp drop in an option's value after a big anticipated event passes.
Definitions
The rapid collapse of an option's implied volatility — and therefore its price — right after a scheduled event like earnings, even when the trader guessed direction correctly.
IV crush In A Sentence
Origin & Usage
Options-market term for the deflation of implied volatility post-event; common in WSB earnings-play discussions.
People Also Ask
What is IV crush?
It's the rapid collapse of an option's implied volatility right after a scheduled event like an earnings report. Because implied volatility drives option prices, the option can lose a lot of value even if you correctly predicted the direction.
Why do options get IV crushed after earnings?
Before a known event, uncertainty pumps up implied volatility and option prices. Once the event passes and the outcome is known, that uncertainty evaporates and implied volatility deflates, dragging the option's price down with it.
How do traders avoid IV crush?
Common approaches include not buying inflated options right before earnings, selling premium instead of buying it, or using strategies designed to be less sensitive to a volatility drop. This is general context, not personalized advice.
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