Trading term
What is IV crush?
IV crush is the sharp drop in an option's implied volatility after a known event, like an earnings report. It can make an option lose value even when the stock moves your way.
Before a known event, options price in the chance of a big move, so their implied volatility (IV) is high. Once the news is out, that unknown is gone and IV falls, often overnight. Options that expire later lose part of their price, because a lower IV makes them worth less.
That's why buying a call before earnings can lose money even when the stock goes up. The stock has to rise far enough to make up for the drop in IV.
For example
In a test of 315 earnings reports from five large US companies since 2011, 30-day implied volatility averaged 34.4% the day before the report and 27.2% the day after.
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That's IV crush in theory — it clicks when you read it on a live chart. Practise it hands-on in the TradeWize Premium Options track.
Explore Premium →Why it matters to you
If you buy options before an event, you pay for the IV that's about to disappear. You need the stock to move more than the options priced, not just to move.
⚠ Being right and still losing
A stock can beat expectations, rise, and your call can still be worth less the next morning. Check how big a move the options are pricing before you buy.