---
title: "What is IV Crush? 99% of option newbies have been tricked by it."
type: "Topics"
locale: "zh-HK"
url: "https://longbridge.com/zh-HK/topics/33041253.md"
description: "In the options trading circle, **&#34;IV Crush (Implied Volatility Collapse)&#34;** is something that people both hate and fear. The core of options trading is volatility; if you don't understand volatility in options, you might as well go home and farm! Many people get the direction right, but still lose money on options; some bet correctly on earnings reports, with the stock price jumping 10%, yet the options depreciate. You might wonder: What the hell is this? The answer is: You got harvested by &#34;IV Crush.&#34; 1. What exactly is IV Crush? First, let's clarify two concepts: IV (Implied Volatility..."
datetime: "2025-08-16T00:10:46.000Z"
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  - [zh-CN](https://longbridge.com/zh-CN/topics/33041253.md)
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author: "[格雷期权](https://longbridge.com/zh-HK/profiles/22550461.md)"
---

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# What is IV Crush? 99% of option newbies have been tricked by it.

In the options trading circle, \*\*"IV Crush (Implied Volatility Collapse)"\*\* is something that people love to hate and fear.

The core of options trading is volatility. If you don't understand volatility in options, you might as well go home and farm!

Many people get the direction right but still lose money on options. Some bet correctly on earnings reports, with the stock price jumping 10%, yet the options lose value.

You might wonder: What the hell is this?

The answer is: You got harvested by "IV Crush."

* * *

## 1\. What exactly is IV Crush?

First, let’s clarify two concepts:

**IV (Implied Volatility)**: The market’s expectation of future volatility, which directly affects option prices.

**IV Crush**: When a major event (e.g., earnings, FDA approval, interest rate decisions) concludes, IV suddenly plummets from high levels, causing the price of your options to **shrink instantly**, even if the stock moves in the right direction!

👉 Simply put, **you’re buying "expectation." Once the "news is out," the expectation loses value, and the price drops.**

* * *

## 2\. A real-world example to feel it

Suppose you buy an ATM call (call option) on TSLA the day before earnings for $12, expecting a rise.

Post-earnings, TSLA indeed rises 3%. You excitedly check your account…

You lost money.

Why?

Because before earnings, TSLA’s IV had risen to 90%. After earnings, IV dropped to 55%. Even with the small stock gain, the IV drop devalued the option, leaving your call at a net loss.

This is called: **Right direction, no money.**

* * *

## 3\. Why does IV Crush always happen after events?

Simple: **Major events bring uncertainty, and uncertainty = risk = high volatility = high IV.**

Option prices include a "volatility premium."

When everyone knows an event is coming—like:

Earnings reports (potential surges or crashes)

FDA approvals for pharma

Major legal rulings

Fed rate meetings

Crypto project launches/meltdowns

—the market naturally bids up IV. In other words: **When you buy options, you’re already paying for the "unknown."**

Once the event passes and the outcome is clear, uncertainty vanishes, IV collapses, and prices crash.

That’s "IV Crush."

* * *

## 4\. How IV Crush affects option buyers and sellers

Buyers (call/put buyers) may lose even with correct directional bets.

Sellers (call/put sellers) benefit most—the faster IV drops, the more they profit.

👉 So before major events, smart money often **"sells volatility"** rather than "bets on direction."

* * *

## 5\. How to avoid getting wrecked by IV Crush?

If you’re an option buyer, these points are critical:

### ✅ 1. Check if current IV is "overpriced"

Use "IV Rank" or "IV Percentile" to gauge where implied volatility stands historically.

IV Rank 80%: Current IV is higher than 80% of the past year—**high risk**.

IV Rank 20%: Relatively cheap, low IV Crush risk.

👉 IV usually rises before earnings, peaking 1-2 days pre-event.

### ✅ 2. Avoid holding naked options into the event

If you must bet directionally, **close before the event** to profit from rising IV. Post-event, you might get harvested.

### ✅ 3. Hedge direction & IV risk with spreads

For example:

**Debit Spread**: Reduces IV risk.

**Calendar Spread**: Exploits IV differences across expirations.

**Straddle/Strangle**: Only use when IV is low.

* * *

## 6\. You can also "exploit" IV Crush!

Smart traders don’t just fear IV Crush—they weaponize it.

For example:

Sell straddles pre-earnings (collecting high time value).

Buy calendar spreads to capitalize on near-term high IV vs. long-term low IV.

Deploy "rent collection" strategies (e.g., selling puts, iron condors).

👉 So IV Crush isn’t just "risk"—**it’s also an "opportunity."**

* * *

## 7\. Summary: IV Crush is the first hurdle for option newbies

You think: If the stock rises, my call profits.

Reality: Even with a rising stock, IV collapse can leave you losing.

You think: Buying options closer to events is more exciting.

Reality: At event resolution, options often crash.

You think: Betting right on earnings means big gains.

Reality: The market already priced in the expectation.

So:

> **You’re not trading stocks—you’re trading "market expectations" themselves.**

If you don’t understand IV, you’re blindly betting on direction and may get harvested by "expectation gaps."

* * *

📌 Want to go deeper?

If you want to know:

Which IV tools can gauge if options are overpriced?

How to arbitrage IV Crush?

Three strategies to avoid high IV traps pre-earnings?

Like + bookmark to avoid naive investor traps and profit from volatility! 💰