IV Crush hits when implied volatility drops right after a big event—like earnings or a Fed meeting. Option prices fall fast. You end up holding a trade that moved in your favor but lost value anyway.
I’ve traded SPX options for over 20 years, both manually and through automation. And I’ve watched this trap snare more retail traders than anything else.
This article will show you:
- What IV Crush is (in plain English)
- When it happens—and why
- How to trade around it
- How I use Iron Condors to profit from it
Let’s break it down—starting with what implied volatility actually means.
What Is Implied Volatility (IV)?
Before we dive into IV Crush, let’s get clear on what implied volatility actually is. In simple terms, implied volatility—or IV—reflects the market’s forecast of how much a stock might move over a set period.
When traders expect big news—like earnings or a Fed announcement—they anticipate more uncertainty. That fear pushes up option premiums.
High implied volatility drives expensive options. Low IV brings cheaper premiums. When the news drops and volatility fades, option values sink fast. That’s the setup for IV Crush.
If you trade options—especially around earnings—you must monitor IV. It offers a clear view into market expectations.
What Is IV Crush in Options Trading?
IV Crush stands for Implied Volatility Crush—a fast, sharp drop in implied volatility. It usually strikes right after a major, scheduled event like earnings, a Fed meeting, or inflation data.
Before these events, traders drive up option prices by pricing in uncertainty. Once the event passes, that premium vanishes—fast.
Even when the stock moves in your favor, your option can lose value. That’s the crush.
Think of it like a balloon: the option price inflates before earnings. If the news feels underwhelming, the air rushes out. The balloon deflates—and so does your premium.
When and Why Does IV Crush Happen?
IV Crush usually hits right after major events—earnings, Fed meetings, CPI reports, or other big announcements.
Traders build in uncertainty ahead of the event. When the news drops, implied volatility collapses, and option prices follow.
This plays out no matter whether the news sounds good or bad. What matters is that the uncertainty disappears.
Earnings IV Crush: The Classic Trap
In the final days before earnings, options premiums rise fast. When earnings drop, IV collapses. Even if the stock moves, you can still lose.
To avoid this, don’t buy options when IV already runs high. Instead, sell premium into high IV using defined-risk strategies like Iron Condors.
How Implied Volatility Impacts Option Prices
An option’s price combines intrinsic and extrinsic value. IV lives inside that extrinsic part.
When IV spikes, premiums inflate. When IV drops, extrinsic value crumbles. That’s why a trade can move your way—but still lose money.
Options sellers flip this to their advantage. They sell when IV is high and buy back after the crush.
The Pain: How IV Crush Hurts Retail Traders
You nailed the move. The stock did what you expected. Yet your option lost money. Why?
IV was already priced in. When it dropped, so did your premium. This happens all the time—especially with SPX, TSLA, AAPL, and AMZN.
Trade Smart Around IV Crush
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- SPX-only
- High-IV focused
- Defined risk
- Built for automation
Risk Management Strategies for IV Crush
- Use defined-risk spreads like Iron Condors
- Keep trade size small (1–2% of capital)
- Avoid short expiries just before events
- Sell when IV is high, not low
How to Trade Around IV Crush
Stop buying options before earnings. Unless you expect a massive move, odds are against you.
Instead, sell premium with strategies like Iron Condors. You profit when volatility drops and price stays in range.
Want to stop missing trades and start automating your edge? Discover how to trade automatically—even if you’re just starting out.
How to Profit From IV Crush With Iron Condors
Iron Condors work best when IV is elevated. You sell both a call spread and put spread outside the expected move—then let IV crush do the rest.
It’s exactly what I do in my Weekly Premium signals—fully automatable via Tradier or Interactive Brokers.
Tools to Track IV (and Spot Crush Setups)
IV Rank and Percentile
- IV Rank shows current IV vs. 1-year history
- IV Percentile tells how often IV was lower
Top Platforms
- ThinkOrSwim – Great for IV and earnings
- Tastyworks – Clean IV visualizations
- Market Chameleon – Earnings volatility analytics
Example: IV Crush on SPX After Earnings
It’s FOMC week. IV Rank is 75%. SPX options are expensive.
The Fed delivers exactly what was expected. SPX barely moves. But IV collapses.
The trader who bought a straddle loses money. The one who sold an Iron Condor? Profits from time decay + falling IV.
That’s what I send weekly in Weekly Premium.
FAQs About IV Crush for Beginners
What is IV Crush?
It’s a sudden drop in implied volatility, usually after a major event, causing options to lose value fast.
When does IV Crush happen?
Right after earnings, Fed meetings, or economic reports.
Does it affect both calls and puts?
Yes—IV is priced into both sides. When it drops, both lose value.
How can I avoid it?
Don’t buy options before major events. Use defined-risk spreads instead.
What strategy works best?
Iron Condors. Sell high-IV premium and profit when volatility drops.
Conclusion and Best Practices
- IV Crush happens after big events
- Both calls and puts lose value
- Use defined-risk spreads to stay safe
- Sell premium when IV is high
- Size positions small and stay consistent
I’ve seen thousands of retail traders get blindsided by IV Crush. But I’ve also shown hundreds how to use it to their advantage.
If you’re ready to trade with edge, join Weekly Premium today →
