IV Crush After Earnings - Why Options Can Lose Value
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Explain why implied volatility often falls after earnings, and calculate how much a stock must move to offset the drop.
IV crush is a sharp drop in an option's implied volatility after an expected event, such as an earnings report, has passed. Because implied volatility is part of every option's price, the crush can take a large bite out of premiums overnight, even when the stock moves in the direction the option buyer wanted.
What Is Implied Volatility? showed that implied volatility reflects movement priced into an option. Before a scheduled event, IV can rise as traders price in the possibility of a large move. Once the news is out, that particular uncertainty is resolved and IV often falls. The OIC's option price behavior FAQ describes the same pattern around market-moving events.
What is IV crush in options?
Some events are known in advance: earnings reports, regulatory decisions, product launches. Before one, nobody knows the outcome, but everyone knows the stock could jump or fall sharply. Option buyers pay up for that possibility, so implied volatility can rise as the date approaches. The premium need not rise: passing time and stock movement can offset that IV increase.
After the event, the outcome is known. The stock has made its move, and that particular uncertainty is resolved, though new uncertainty may remain. Implied volatility typically falls back toward normal levels, often by the next trading session. That fall is the crush.
The implied volatility cycle around earnings
Before the report
Event uncertainty can lift implied volatility
The report
Earnings are released
After the report
Event uncertainty resolves; implied volatility often falls
The crush hits extrinsic value, the part of the premium above intrinsic value that Intrinsic and Extrinsic Value introduced. At-the-money options, which carry the most extrinsic value, usually lose the most.
Why can an option lose value after earnings when the stock moves?
Because the gain from the stock's move can be smaller than the loss from falling implied volatility. The two effects hit the option at the same moment, and the price reflects the net.
Worked example
A hypothetical IV crush on an XYZ 100 call
The numbers here are hypothetical, chosen to show the mechanics. Prices are European-style Black-Scholes values with a 4.5% interest rate and no dividends. Contract figures assume 100 shares and exclude fees and bid-ask spreads.
The day before earnings. XYZ trades at $100. A 100 call expiring in 7 days is priced with 80% implied volatility, because the market expects a big move. The call costs $4.46 per share, or $446 per contract.
The day after earnings. XYZ beats expectations and rises to $103, a gain of $3. The event is over, so implied volatility falls to 30%. With 6 days left, the call is now worth $3.55, or $355 per contract.
- Result: the stock moved the right way, and the call lost $91.
- Without the crush: had implied volatility stayed at 80%, the same call would be worth $5.87, a gain of $141. The crush cost about $231 per contract compared with that.
- What it took to break even: after the crush, XYZ needed to reach about $104.10, a move of more than 4%, just for the call to be worth its $4.46 cost again.
To find that resale threshold, keep six days and 30% IV in the post-report model, then raise the stock input until the call's model value again equals its $4.46 purchase price. That happens near $104.10. This differs from the call's $104.46 break-even at expiration (the $100 strike plus its $4.46 premium), when no time value remains.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
The stock rose, and the call still lost value
Value of one XYZ 100 call
Options also tell you how big a move the market is pricing in before an event. The Expected Move Before Earnings, in the Advanced Strategies course, shows how to read that number from the option chain.
How can you plan for IV crush?
A scheduled event gives you a time to watch for IV crush, but neither the drop nor its size is guaranteed. A few habits help:
- Check the calendar. Before buying any option, know whether an earnings date or another scheduled event falls before expiration.
- Compare the move priced in with the move you expect. For a call or put, consider direction, premium, remaining time and a plausible post-event IV together.
- Know what you are paying for. A premium that is mostly extrinsic value, bought right before an event, is exactly what the crush removes.
- Remember the seller's side. Selling premium before an event collects the high implied volatility, but a move bigger than expected can cost far more than the premium. Buyers and Sellers covers why short options carry the larger risk.
Selling premium before an event carries the full risk of a short option. A short call you do not cover with shares has unlimited risk if the stock jumps; a short put can lose up to the strike x 100 minus the premium if the stock collapses.
Check your understanding
Why does implied volatility often fall right after an earnings report?
Show answer
Because the uncertainty it was pricing has been resolved. Once the result is known, event uncertainty often falls and implied volatility may drop. New uncertainty can keep it elevated.
In the example, XYZ rose from $100 to $103, yet the call fell from $4.46 to $3.55. What caused the loss?
Show answer
Implied volatility fell from 80% to 30%, and a day of time value passed. That removed more extrinsic value than the $3 rise in the stock added.
In the example, why did XYZ need to reach about $104.10 the day after earnings for the call to be worth its $4.46 cost, when its break-even at expiration is $104.46?
Show answer
The day after earnings the call still has six days of time value, at the lower 30% implied volatility, so the stock needs a little less than the expiration break-even. At expiration no time value remains, so the call is worth only its intrinsic value and needs $104.46.
Key takeaways
- IV crush is the sharp fall in implied volatility after a known event, such as earnings, has passed.
- It removes extrinsic value, so an option can lose money even when the stock moves the right way.
- After the crush, the stock has to move further than you might expect just to get back to what you paid.
- Buying options before an event is a bet on the size of the move, not just its direction.
Common questions
Does IV crush always happen after earnings?
Not always, but it is common. Implied volatility usually builds into a scheduled event and falls once the result is known. How far it falls varies by stock and by report, and a surprising result can keep implied volatility elevated for a while.
Does IV crush affect in-the-money options?
Yes, but usually less. IV crush removes extrinsic value, and deep in-the-money options carry less of it, because most of their price is intrinsic value, which falling volatility does not touch. At-the-money options usually lose the most.
How do you avoid IV crush?
You cannot stop it, but you can plan for it: avoid buying options just before an event without a view on how big the move will be, close long options before the report, or use strategies that are less exposed to falling implied volatility. Each choice has its own trade-offs.
Can you profit from IV crush?
Option sellers can, because the premium they sold loses value when implied volatility falls. But the risk is real: if the stock moves more than the market expected, a short option can lose far more than the premium collected.