IV Crush Explained
Learn what IV crush means, why option premiums can drop after events, and how implied volatility affects calls and puts.
IV crush is a sharp drop in implied volatility that reduces option premium after uncertainty falls, often after earnings or major news.
Before risking money
Know the max loss and the dollar amount after the 100-share multiplier.
Paper trade the exact contract and record bid, ask, midpoint, IV, and Greeks.
Avoid contracts with wide spreads, stale quotes, or thin open interest.
Understand expiration and what happens if you hold too long; short-option positions add assignment risk.
Lesson
Plain-language concept
Before an event, options may price a large expected move. After the event, uncertainty is lower, so implied volatility can fall and remove extrinsic value from calls and puts.
Lesson
What can go wrong
Beginners often buy options before events because they expect direction, then discover that the option needed a bigger move to overcome the IV drop.
Lesson
When to use CuteMarkets data
Use chain IV, Greeks, and historical quote or aggregate context to compare pre-event premium with post-event behavior.
Numeric example
Event option
Setup
- Call premium before earnings: $6.00
- Vega: 0.25
- IV drop after event: 12 points
Outcome
- Estimated IV impact is -$3.00 before stock movement.
- The stock must move enough to offset that volatility loss.
Direction alone may not beat IV crush.
Practice surfaces
Tools that make this visible
FAQ
Common beginner questions
Does IV crush affect calls and puts?
Yes. A volatility drop can reduce extrinsic value in both calls and puts.
Is IV crush guaranteed after earnings?
No, but it is common because uncertainty changes after the event.
How can I see IV crush?
Compare IV and premium before and after the event across the same contract or similar expirations.