AUG · ISSUE 35 · August 27, 2026
CONCEPTIV crush: right on direction, still down
You buy an option before earnings, the stock moves your way, and your option is worth less. Not magic: volatility.
WHAT IT IS
IV crush
volatility collapses
WHEN
after the event
earnings, data, decisions
WHO IT CATCHES
the beginner
the classic mistake
THE SIMPLE RULE
IV crush
implied volatility drops sharply after the event
Before a big result, the market pays up for uncertainty: the implied volatility of options spikes. The moment the data lands, that uncertainty disappears and volatility collapses, even if the stock moved. That drop can swallow your entire gain.
THE FIGURE
ZOOM IN50%
50%
▼ how far volatility can deflate after the event
It's like paying resale price for a ticket the night before the show: the moment it starts, that markup is gone.
An option's implied volatility can fall by half overnight once the event passes. That air leaking out is money leaving your option.
- PREMIUM
- — The price you pay to buy an option.
- EVENT
- — A scheduled data point or news: earnings, inflation, a rate decision.
THE IDEA
TO GET ITYou pay for the fear, not the move
“With an option you don't just buy direction: you buy uncertainty. And uncertainty is worth zero once the data is known.”
When you buy an option before an event, much of what you pay is the price of uncertainty. Once it clears, that price evaporates.
- UNCERTAINTY
- — What isn't known yet. In options, it carries its own price.
- EXTRINSIC
- — The part of an option's price that isn't real value, but time and volatility.
HOW IT WORKS
THE CURVEVolatility climbs, then collapses
The peak is right before the event. Buying there means buying at volatility's most expensive point.
Illustrative curve. Implied volatility inflates as the result nears and collapses the moment it's out, even if the stock moves your way.
- PEAK
- — The highest point of the curve, here the maximum volatility before the data.
- IMPLIED VOLATILITY
- — The expected move baked into an option's price.
HOW TO AVOID IT
3 KEYSThree ways not to fall for the trap
WATCH VOLATILITY, NOT JUST PRICE
Before buying an option, check whether its implied volatility is inflated by an upcoming event. If it is, you're overpaying.
COMPARE THE IMPLIED MOVE
Options price a specific move. If the stock moves less than that, you lose even when you nailed the direction.
THINK ABOUT SELLING, NOT JUST BUYING
Whoever sells options before an event collects that inflated volatility. It's the flip side of IV crush, with its own risk.
IV crush can't be avoided entirely, but its worst versions can be understood and dodged.
- IMPLIED MOVE
- — The move options are pricing for the day of the event.
- SELLING OPTIONS
- — Collecting the premium for taking the opposite obligation. Wins if the move is smaller than expected.
ANATOMY
INSIDE THE PREMIUMWhat an option's price is made of
That 55% of volatility is exactly what evaporates after the event. That's why you can be right and still lose.
Illustrative split of an option before an event. Most of what you pay is air: time and volatility, not real value.
- INTRINSIC
- — An option's real value if it expired right now.
- TIME VALUE
- — The part of the price lost as expiry approaches.
TO SEE IT
EXAMPLETools for tracking volatility
| VIX | ~16 | → 0.0% | The fear index. Measures the market's expected volatility as a whole. |
| VIXY | ~20 | → 0.0% | An ETF that tracks rising volatility. Climbs as nerves grow. |
| SVIX | ~25 | → 0.0% | The opposite bet: wins when volatility deflates, like in an IV crush. |
| SPY | ~680 | → 0.0% | The S&P 500. Its options show IV crush around every major macro print. |
Not a recommendation. These are examples of instruments that reflect volatility, so you can see the concept in action. Approximate prices.
- VIX
- — An index measuring the expected 30-day volatility of the S&P 500.
- ETF
- — A listed basket that tracks an index or strategy.
WRAP
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- IV CRUSH
- — A sharp drop in implied volatility after an event.
- PREMIUM
- — The price you pay to buy an option.