IV Crush is the silent killer in options trading. After earnings announcements, Implied Volatility drops dramatically — and so does the value of your options. Even if the stock moves in your favor, your position can lose value.
What happens during IV Crush?
- Before earnings: High uncertainty = high IV = expensive options
- After earnings: Uncertainty resolved = IV collapses = option value drops
- Average loss: 30-50% of premium
The solution?
Option buyers before earnings pay for uncertainty. Option sellers collect that premium and profit from IV Crush. That's the difference between retail and smart money.