If you’ve ever bought a call or put option before earnings—and the stock moved your way but you still lost money—you’ve experienced IV Crush.
It’s confusing. Frustrating. Even feels like a scam. But it’s not.
IV Crush happens when implied volatility drops right after a big event—like earnings or a Fed meeting. Option prices fall fast. You’re left holding a trade that worked directionally, but lost value anyway.
I’ve traded SPX options for over 20 years, both manually and with automation. And I’ve seen this trap catch more retail traders than any other.
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 get into IV Crush, it helps to understand what implied volatility actually is. In simple terms, implied volatility—or IV—is 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—uncertainty increases. That fear gets priced into the options market. As a result, option premiums go up.
High implied volatility means expensive options. Low IV means cheaper premiums. When volatility collapses after news, option values drop fast. That’s the setup for IV Crush.
If you trade options—especially around earnings—you need to watch IV closely. It’s a window into the market’s expectations.
What Is IV Crush in Options Trading?
IV Crush stands for Implied Volatility Crush—a fast, sharp drop in implied volatility. It usually happens right after a big, scheduled event like earnings, a Fed meeting, or inflation data.
Before these events, uncertainty inflates options prices. Once the event passes, that premium disappears—fast.
Even if the stock moves in your favor, your option can lose value. That’s the crush.
Think of it like a balloon: the option price gets pumped up before earnings. If nothing exciting happens, that air rushes out. The balloon deflates—and so does your premium.
When and Why Does IV Crush Happen?
IV Crush usually strikes after a major event—earnings, Fed meetings, CPI reports, or major announcements.
Traders price in uncertainty before the event. Once the news drops, implied volatility collapses, and so do option prices.
This happens regardless of whether the news is good or bad. What matters is that uncertainty is gone.
Earnings IV Crush: The Classic Trap
In the days before earnings, options premiums rise fast. Once earnings hit, IV collapses. Even if the stock moves, you might still lose.
To avoid this, don’t buy options when IV is already inflated. Instead, learn to sell premium into high IV using defined-risk trades like Iron Condors.
How Implied Volatility Impacts Option Prices
An option’s price includes intrinsic and extrinsic value. IV lives inside that extrinsic value.
When IV is high, premiums are inflated. When IV falls, extrinsic value collapses. That’s why you can be right on the move but wrong on the trade.
Options sellers flip this dynamic. They sell when IV is high and buy back after the crush.
The Pain: How IV Crush Hurts Retail Traders
You were right. The stock moved as expected. But your option still 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
💡 Tired of getting crushed by implied volatility?
Sell inflated premium with Iron Condors. I send these every week in Weekly Premium.
- 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.
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 →
