I keep hearing about iv crush lately but I am not sure what it means.
I saw some traders say it affected their earnings plays even when they were right about the direction. I lost money on a few option trades recently and wonder if this was the issue.
Can someone explain how this works?
This exact thing burned me in my second year trading AAPL earnings.
Bought calls before the announcement. Stock went up 3% just like I predicted, but my options still tanked 40% overnight. Market was expecting bigger moves, so when earnings came out normal, volatility disappeared.
Now I sell options before earnings instead of buying them.
IV crush hit my TSLA calls last month. I lost about 200 bucks.
Options get pricey before big events because everyone expects wild price swings. But when earnings drop and the stock just moves normally, all that extra cost you paid vanishes.
It’s like paying for overnight shipping when regular delivery would’ve worked fine. You’re out that premium for nothing.
Skip buying options right before earnings unless you’re betting on major surprises.
IV crush happens when implied volatility drops sharply after earnings or major events. Options are priced for significant moves, but once the event is over, that extra premium disappears, even if you guessed the direction right.
Consider it like buying a costly lottery ticket for a big prize, only to discover they’ve reduced the payout. Your earnings trades likely suffered because volatility fell right after the announcement, reducing your options’ value despite predicting the stock’s movement correctly.
Volatility drops after events because there’s less uncertainty. Options lose both time value and volatility premium at once. Check VIX levels before you enter any positions.