Earnings Volatility Crush Strategies
How to profit from the predictable IV collapse after earnings announcements
What Is IV Crush?
Implied volatility rises in the weeks before an earnings announcement as uncertainty increases. The moment earnings are released — regardless of whether the news is good or bad — that uncertainty is resolved and IV collapses sharply. This predictable pattern is called IV crush or volatility crush.
Why It Creates Opportunity
IV crush is one of the most reliable patterns in options trading. If you sell options before earnings, the rapid IV decline after the announcement works in your favor even if the stock does not move much. The option you sold becomes cheaper simply because volatility dropped.
Common Strategies
Short Straddle/Strangle — Sell both a call and a put to maximize premium collected from elevated IV. Profit if the stock stays within the expected move range.
Iron Condor — A defined-risk version of the short strangle. Sell OTM call and put spreads to collect premium while limiting maximum loss.
Calendar Spread — Sell a short-dated option (which will experience the crush) and buy a longer-dated option (which retains more value).
Key Terms
IV Crush — The sharp decline in implied volatility after an earnings announcement
Expected Move — The range the market implies the stock will move by expiration
Short Straddle — Selling a call and put at the same strike price
Calendar Spread — Selling a near-term option and buying a later-term option at the same strike