IV crush
Implied vol always collapses after earnings. Sell premium when it's rich.
Implied move calculator
The market's expected one-day move priced into options. Use the ATM straddle on the expiry just after earnings.
Implied move
±8.00%
Expected upper
$162.00
Expected lower
$138.00
Rule of thumb: ~68% probability the stock closes inside this range the day after earnings (1σ). A move ≥ implied = volatility long wins. A move < implied = short premium wins.
What is IV crush?
In the 2–3 weeks before earnings, implied volatility on a stock's options inflates as traders price in the uncertainty of the print. The moment results are released, that uncertainty evaporates — and IV collapses 30–60% overnight. This is "IV crush." Even a directionally correct call can lose money if the stock moves less than the implied move priced in.
Setup: short iron condor
- Structure: Sell an OTM call spread + OTM put spread, both expiring the week of earnings.
- Strike selection: Short strikes ~1.0–1.3× the implied move from spot. Long strikes 5–10 points further out for defined risk.
- Credit target: Collect ≥ 25% of the wing width (e.g. $1.25 credit on a $5-wide condor).
- Exit: Close at 50% of max profit the morning after the print, or take a managed loss at 1.5× the credit received.
When NOT to sell premium
- Small caps and recent IPOs systematically exceed the implied move — long vol bias.
- Biotech with binary catalyst readouts — gaps of 40%+ are common.
- When realized vol on prior 4 prints averaged 1.5× implied — the market is under-pricing.
- Macro week (FOMC, CPI) overlapping the report — second source of vol you didn't account for.